The Irish market shed another 2 per cent of its value yesterday, bringing its losses for the week to 7 per cent, or €7.2 billion.
The latest decline came after the emergence of more subprime concerns in the US, where Morgan Stanley became the latest large investment bank to write down billions in the ongoing mortgage crisis. This put pressure on banking stocks globally, but Irish financials suffered more than most. The Iseq financial index was down 3.26 per cent in a punishing session, with Anglo Irish shedding 6.4 per cent.
European stocks in general retreated to their lowest level in more than six weeks, again led by financials. Fortis sank the most in 4½ years. Credit Suisse Group and HSBC Holdings Plc also declined. ING Groep NV fell after brokerages downgraded the financial services firm, saying earnings will suffer from subprime investments.
"We'll probably have some more bad news out of the banking sector," said Julian Chillingworth, who helps to oversee $25 billion (€17 billion) as chief investment officer at Rathbone Unit Trust Management in London.
"A lot of financial companies have bought assets they don't fully understand, so it won't be just the banks."
One Irish dealer wondered how bad the picture for the Iseq would become if an Irish bank actually reported bad news.
Pension fund consultant Mercer said yesterday that over-exposure to Irish equities had left many Irish pension funds with flat returns in the year to date, despite their having gained 5 per cent in the first half. It noted that equity markets worldwide have performed "reasonably well" in the year to date, while Irish equities are down more than 20 per cent since January.
"Recent events highlight once again the importance of broad diversification - both geographically and across industry sectors - for Irish pension funds," said Brian Griffin, senior investment consultant with the company.
Signals for today's trade were not positive last night. The Nasdaq was down 3 per cent by mid-afternoon after Cisco said credit market problems were hurting demand from key customers, including banks.
The Dow Jones and the S&P 500 index each slid more than 1 per cent, a day after the Nasdaq had its worst decline since February. - (Additional reporting, Bloomberg)
