It has been another gloomy week in Dublin despite yesterday's interest rate cut with the ISEQ tumbling from 3958 on Monday to 3767 yesterday.
Worries about the world economy continue to dominate the thinking of investors and next week may be rocky, although the interest rate cut could provide a short term spark for Dublin.
Dealers said they were "caught on the hop" by the mid-afternoon announcement and said the impact of the cut will be assessed properly next week. Despite this, the main financial stocks strengthend yesterday.
AIB was up 19p to 835p, Irish Permanent was up 10.65p to 740p, while First Active was up 5p to 265p. Bank of Ireland, however, dipped 6p to 974p, in quiet trading. It was the end of a nervous week for the financials. Bank of Ireland was knocked back from its Monday price of 1025p and a sell-off in bond markets will mean that sentiment towards the financial overall is likely to remain fragile.
Worry continues, with negative forecasts about the world economy starting to emanate from the United States. Among them was a downgrade in predictions for US corporate earnings from Goldman Sachs.
The weakness of the dollar against the yen sent shockwaves through international markets which expect the currencies of developed countries to be relatively stable.
A major issue for investors is how far and how fast the unwinding of hedge fund currency positions will be. The speed of the yen's rise on Thursday was blamed on hedge funds, rushing to sell dollars to repay yen borrowings or repurchase yen short positions.
Many investors have used cheap borrowings in yen to fund investments in safe haven currencies like marks and dollars, but have been hit hard by a tightening of credit and have moved to reduce the scale of their investments.
The absence of overseas investors from the Dublin market was noticed by traders, who saw significant sell-offs in some of the larger names like Smurfit and CRH.
Apart from the sharp falls, the main corporate news of the week was the arrival in the market of First Active.
The shares were floated at a price of £2.25. Since then the price has settled down in the 260p-290p range, although further shares are expected on the market, as smaller shareholders decide to cash in.
While exploration stocks were relatively stable, this did not prevent 25 per cent of Tullow Oil's share price being eaten away on Thursday evening. The company was forced to issue a statement saying the price drop was "unwarranted".
Many companies who have seen their own share price slashed would use the same phrase, but with the markets remaining so volatile, "unwarranted" price falls seem set to continue.
