International investors will be holding their breaths this morning, after the biggest one-day fall in New York share prices since the crash in 1987. The fear now is that more falls may be on the way, as the big sell-off which many had feared finally arrives.

Whether this is a once-off fall, simply associated with the Far Eastern markets or something more pervasive, has yet to be decided. Much will now depend on the performance of Asian markets overnight and the collective nerve of investors in the rest of the world today.

Certainly, investors and analysts had warned for some time that share markets had appeared highly valued and were ripe for a fall. But few had anticipated a decline on the scale of last night's US collapse. The danger now is that the view that share prices have become over-valued will spread and lead to a market global downturn in share prices.

Despite a series of curbs which the New York Stock Exchange uses to rein in major changes in the Dow Jones index, the market managed to fall by over 7 per cent. Yesterday's session was halted prematurely after an hour's break was instigated in the last hour's trading. Earlier in the day a halfhour break was implemented as the losses reached 350 points. After 500 points a full hour's break was put in place.

The provisions were introduced during the October 1987 stock market crash, when the Dow plunged 22.61 per cent, or 508 points in a single session. European markets will certainly open very nervously this morning and prices will be heavily marked down. More falls are almost certainly on the cards as few investors are rushing to buy and many are still desperate to sell.

Warnings from the White House to remain calm had little impact yesterday, and the danger is that the herd mentality in the market will lead to further selloffs. One key factor, of course, will be what happens in Hong Kong overnight and elsewhere in the Far East.

Last week, the Irish share market managed to avoid the worst of the falls. But opening after the Bank Holiday it is bound to fall sharply on opening today and from there be heavily influenced by what happens on international markets. Mr Jim Power, chief economist at Bank of Ireland, warned that the UK Chancellor Gordon Brown's statement will have added to nervousness.

"Equity markets have been very nervous, given the heights they have been at, so this news on top of what going on in South East Asia is not good," he warned.

All eyes in the European bourses today will be on the Hong Kong market, with testimony from Mr Alan Greenspan, chairman of the Federal Reserve, tomorrow on the US economy also lending an added importance. Yesterday, investors pounded Hong Kong stocks with a fresh wave of selling, as analysts painted a bleak outlook for the beleaguered market, amid the financial crisis shaking the former British territory.

The blue-chip Hang Seng Index slid 646.14 points, or 5.8 per cent, to close at 10,498.20, nearly wiping out all of the 718.04-point gain made on Friday as investors took advantage of the rise to unload more holdings.

An attack last week on the Hong Kong dollar, which has so far survived the onslaughts forcing Thailand, Malaysia and Indonesia to abandon their fixed exchange rate systems, has rocked confidence in the territory, analysts said.

The authorities are now attempting to grapple with a loss of confidence in the outlook for the economy under the current exchange rate regime.

There is also a lot of fear in the market about what the dire consequence would be if the 14-year-old peg to the dollar were to go and in the event it doesn't go, what the higher interest rates would do to the economy. However, no matter what the upheaval in Honk Kong, it cannot explain the sharp collapse in New York last night. True, analysts have been warning about the impact of the Asian market crisis on economic growth in the region and the knock-on impact on exports from the US and particularly from the computer sector.

But the nerves from the Far East have led US investors to question the overall level of the market. Yesterday, investors were questioning whether the level of corporate earnings justified share prices in a whole range of sectors.

Investors will clearly lose as share prices fall and the value of pension and unit funds in which many people have an interest will take a hit. It is too early to judge the impact on the overall outlook for international economic growth. Confidence will certainly be affected, but much will now depend on the how severely last night's Wall Street collapse knocks on to the rest of the world.