Markets tumble ahead of Fed report

Most European stock markets fell sharply yesterday after a weak opening on Wall Street and as investors started worrying about what the US Federal Reserve chairman, Mr Alan Greenspan, will say this week. In Dublin the ISEQ index fell from last week's record highs, dropping by 64.38 points to 3546,19, a fall of 1.8 per cent. The two banks shares, which have both gained strongly in recent weeks, lost ground, with AIB down 14p and Bank of Ireland losing 19p. Smurfit fell 11p to 213p, although dealers said trading volumes overall were light. Paris suffered an extra headache with the announcement of big company tax rises aimed at cutting the French budget deficit for

European monetary union, although prices bounced back before the close.

But the major depressant was New York, where investors took profits yesterday morning for the second session running after the

Dow's brief trip over 8,000 last week. The Dow hit a low of 7,840

points and, although it later bounced back, it was still down about

10 points at 7,900 when European markets closed for the day. It recovered more ground later and closed at 7906.72, up 16.26.

London was one of the biggest casualties, with the FTSE-100

closing down 71.5 points or 1.47 per cent at 4,805.7 - a far cry from

Friday morning when it came within two points of breaking 5,000 for the first time. Markets were, however, nervous about the

Humphrey-Hawkins testimony today when Mr Greenspan will report to

Congress on the state of the US economy. Mr Greenspan sent stock markets plunging around the world last December when he warned investors against irrational exuberance.

The French market was down for much of the day, following news of company tax increases.

Frankfurt had a volatile day, eventually closing down 2.1 per cent. It had earlier risen on news that two of Germany's largest commercial banks, Bayerische Vereinsbank AG and Bayerische Hypobank, would merge.