Colm Kelpie and Peter Flanagan
International stocks tumbled yesterday with Irish shares losing more than 5pc amid volatile trading and fears about the health of the global economy.
Bank of Ireland closed down a massive 10pc, with other major stocks including Paddy Power and CRH down 6.6pc and 8.1pc respectively.
Stock indexes fell sharply, led by banking stocks in Europe and Wall Street tech stocks on persisting fears of a global economic slowdown, while benchmark 10-year Treasury yields hit their lowest in a year on demand for assets deemed less risky.
John Cronin of specialist bank Investec said fears about a slowdown in China, global deflation and the prospect of lower interest rates for longer were fuelling investor worries.
“In terms of the ISEQ itself, I think it is being caught in the crossfire,” Mr Cronin told the Irish Independent.
“The global concerns are highly relevant to Irish-listed companies, most of which generate the vast bulk of their revenues from overseas. So they’re getting caught.
“In terms of Bank of Ireland, banks will respond more severely in the case of a downturn and equally so in the case of an upturn. Banks respond to a greater degree than stocks in other sectors due to their leveraged exposure to the economy.
“While we are cognisant of the global macro headwinds, we are positive on the continuing growth prospects for the Irish economy – and we believe the Irish banks continue to be well placed to benefit from this recovery.”
Global equities retreated last week in volatile trading amid investor concern over oil prices, earnings and the strength of the US and Chinese economies.
That sentiment however continued into Monday even though most Asian markets are closed this week to celebrate the Chinese new year.
A gauge of investor sentiment today hit a ten-month low, reflecting worries, while UK business confidence dropped back to levels not seen since 2013.
Oil prices continued to slide, with analysts accepting that prices will remain low for months to come at least. A meeting between Saudi Arabia and Venezuela failed to reassure investors of measures to bolster sagging prices.
Shares of US giant Chesapeake Energy fell over 50pc to their lowest levels since 1999 on reports the company had hired restructuring lawyers.
“We need oil to stabilise to provide some confidence for investors, partly because to a degree, investors’ stress is high, earnings visibility is low, and market internals continue to weaken,” said Terry Sandven, chief equity strategist at US Bank Wealth Management.
Brent crude – the European benchmark – was last down 37 cents, or 1.09pc.
“Investors can’t make up their minds about the global economy, but the risk of recession and deflation is rising,” said Francois Savary of Prime Partners, a Geneva-based investment manager.
“It’s not enough that valuations have receded quite significantly and earnings haven’t been too bad. Sentiment is very low and there isn’t much visibility right now. That’s frightening.”
ISEQ Overall Index drop yesterday
FTSE 100 Index fall yesterday
Europe-wide Stoxx 600 index drop yesterday