Stronger-than-expected Chinese growth data spurred concern today about tighter monetary policy, prompting a sell-off in equities led by emerging markets.
The Irish index of shares was almost 1 per cent lower shortly before 2pm, led by declines in airlines and pharmaceutical stocks.
Aer Lingus shares fell 4.6 per cent to €1.03 this afternoon, as the company continued to struggle with a dispute with cabin crew. Some 2,600 passengers were facing disruptions today as the airline cancelled 34 flights, the highest level of disruption faced by passengers since the dispute over new rosters began on Monday.
The company this afternoon pledged to operate a full schedule from tomorrow using aircraft hired from Ryanair and other carriers.
Shares in Ryanair were off 6 per cent to €3.51 this afternoon.
Elan stock fell 2.8 per cent to €4.90.
Bank shares were broadly flat this afternoon, with both AIB and Bank of Ireland unchanged.
At the opposite end of the market, CRH rose 1 per cent to €14.89. Data from the US yesterday showed housing starts in December fell 8 per cent to an annual rate of 529,000, but permits were ahead of estimates. Analysts described the rise as encouraging, but noted that home builder confidence remained weak. The US residential market accounts for about 10 per cent CRH's earnings before interest, tax, depreciation and amortisation.
Chinese growth soared past forecasts and inflation slowed less than expected in the fourth quarter, prompting worries the government may intensify tightening.
The potential for measures to slow Chinese growth ending up as a hard landing is one of the major risks cited by investors heading into 2011.
"A lot of Asian economies, and especially China, (are) overheating. People have invested heavily in commodity shares and any disappointing news might provoke a ... correction," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels.
Emerging market stocks were the main victim, with MSCI's benchmark index losing more than 1.2 per cent and slipping into negative territory for the year.
Overall, global stocks as measured by MSCI lost 0.6 per cent.
In Europe, the FTSEurofirst 300 was down nearly three-quarters of a per cent, adding to 1.3 per cent losses yesterday. Mining stocks were among the biggest losers on the assumption that demand for basic resources would fall if China's growth is reined in.
Earlier, Japan's Nikkei closed 1.1. per cent lower.
Overnight, the US S&P 500 suffered its biggest decline in nearly two months as Goldman Sachs posted a 53 per cent drop in profit on a tumble in trading revenue and Wells Fargo came in below some analysts' estimates.
The euro edged up against the dollar on persistent demand from sovereign accounts and while investors gave euro zone officials time to make progress on finding a sustainable solution to its debt crisis.
Traders said Mideast and Asian central banks were buying.
Investors were generally optimistic the European Union's rescue fund (EFSF) will ultimately offer a comprehensive solution to help euro zone countries finance mounting debts.
The single currency was at $1.3485. It hit $1.3539 yesterday, its strongest since late November.
Additional reporting: Reuters
