Uncertainty is expected to continue on markets across Europe today after heavy losses yesterday on the back of a weakened performance on Wall Street. The Dow Jones closed up 16.99 points last night but the marginal gain may not be enough to calm market nerves.
The Dublin market fell by more than 151 points or 3.1 per cent despite a recovery in New York in the afternoon. The view was widespread in most markets that the falls were a correction and that the recent strong recovery has been overplayed.
As this viewpoint gained ground yesterday, dealers sought to take profits and many leading stocks lost out.
Other dealers said the markets are satisfied that interest rates in London and the US will not fall before Christmas and this has added to the rush to secure profits. Even the announcement of the Exxon/Mobil and Total/Petrofina deals, failed to improve the mood of investors.
The gloomy picture was compounded by the first economic data of December which showed manufacturing industries around the globe continuing to face pressure.
Purchasing managers' surveys in five European countries all indicted declining activity in the sector, as did a similar report in the US. Dealers interpreted the findings as indicating that further disappointing corporate news might be on the way.
The poor economic news followed the large fall in the Dow Jones Industrial Average on Monday when the index dropped by 216.53 points or 2.32 per cent.
The Nasdaq suffered a worse fate with a fall of 3.32 per cent. The sharp downturn for oil and technology stocks was particularly marked when European dealers started trading yesterday.
As a result, in London, the FTSE 100 suffered its biggest percentage loss of the year, when it finished 3.6 per cent weaker at 5,537 points.
In Germany the Xetra Dax closed down 4.95 per cent or 248 points as profit taking set in among dealers. Traders in Germany were surprised by the magnitude of the slippage. One said: "I would have expected it to be spread over a couple of days."
Stocks in Paris took a nosedive, tracking the Dow Jones lower as investors locked in profits based on the view that the markets have risen too high, too fast. The CAC40 index closed down four per cent or 155.04 points at 3,688.34.
In Hong Kong, the Hang Seng index fell 4 per cent to close below 10,000.
One Dublin dealer said last night: "This is a correction of the recent recovery and has been expected for some time."
However, others warned that European markets are likely to come under pressure from a tightening of liquidity in the coming weeks.
Bank of Ireland was one of the worst affected stocks at home, shedding 90p to close at 1310p, while AIB dropped 50p to end the day at 1000p. The pain was shared with other big names with CRH down 30p to 1005p and Irish Life sliding 35p to 555p.
Stocks with a listing on Wall Street were among the big losers in the rush to take profits. Iona Technology was back 125p at 1775p which reflected a similar drop in New York, while Elan shed 181p to finish at 4625p.
