Global markets steady as Irish stocks struggle

Global stocks steadied somewhat yesterday following their decimation last week, though the Republic failed to climb out of the doldrums and continued its decline.

The Iseq index of Irish shares closed down 1.2 per cent - but off its lows of the day. The fall wiped €506 million off the index, which last week lost as much as €8.6 billion in five days of trading.

Dealers were at a loss to explain why the Republic had underperformed its peers, except to say that this had been a common trend over the past few months.

"When things are good we seem to do better and when they are worse we perform worse," said one Dublin trader, adding that at this moment in time he couldn't see any signs of a way out.

Another said Irish stocks were suffering in particular as a result of the large amount of trading that is done in contracts for difference (CFDs). These products allow investors to borrow large amounts of money to invest in the market in the hope it will go up. Now that it is falling, stockbrokers are asking them to pay back their debts, meaning that investors are losing substantial amounts of money. The Iseq is down more than 17 per cent since briefly breaking through the 10,000 level back in February.

In Europe markets were mixed, with a sense that investors were trying to put on a brave face and turn their backs on last week's losses.

In the UK the FTSE 100 closed slightly lower, down 0.15 per cent, as M&A news and firmer company results struggled to counter fears over interest rates and credit markets.

The UK benchmark index has lost about 6 per cent so far this month, its heaviest monthly loss since January 2003, and is down 0.2 per cent so far this year.

Other major European stock indices also ended the day marginally lower, hitting their weakest levels in five months thanks to the declines of last week.

Yesterday the pan-European FTSEurofirst 300 index lost nearly 0.2 per cent, while in Germany the DAX index closed up 0.06 per cent and in Paris the CAC-40 was up 0.04 per cent.

Overnight in Tokyo, Japan's Nikkei finished almost flat after hitting its lowest in nearly four months.

Dealers were apprehensive about predicting an immediate turnaround, however. "The correction that we've been expecting for absolutely ages has happened," said Neil Parker, market strategist at Royal Bank of Scotland. "We might get a bit more of that. At the moment sentiment is very shaky."

Last week's sell-off was prompted by fears that a rise in defaults on US subprime mortgage loans could spiral into a broader financial crisis, with knock-on effects around the world.

In the US, stocks were little changed though trading was erratic after markets had their worst week in nearly five years as concerns about the deteriorating credit market countered optimism about the earnings outlook.