Stock indices worldwide tumbled on Thursday on fears over the health of the global economy, with banking shares slumping on both sides of the Atlantic, while safe-haven 10-year Treasury yields hit their lowest since 2012.
Investors fear that the negative interest rates employed by a growing band of central banks to boost economic growth are now undermining the health of banks.
The US benchmark S&P 500 stock index was 1.5 per cent lower and the FTSEurofirst 300 index of top European shares was down 3.39 per cent to its lowest level in two and a half years.
The decline in stocks and came even as US Federal Reserve chairwoman Janet Yellen sought to reassure investors in Congressional testimony that the Fed will remain flexible in its approach.
However, the markets already do not expect the Fed to raise rates further this year, compared with Fed forecasts that still point to more tightening.
Dublin
The Irish market swung lower in line with other European bourses, closing 2.4 per cent down at 5,752.
Permanent TSB had another tough day falling nearly 6 per cent to €2.78 amid a general weakness in financial stocks laid low by more cautious soundings from France's second-biggest bank Société Générale.
While Bank of Ireland closed down 0.4 per cent at 26 cents, it out-performed most in the sector.
Food group Kerry traded down 2.4 per cent at €70.29 after a peer in the US released weaker numbers overnight.
Ryanair was also weak shedding 2.1 per cent to finish at €13.38, despite results from Norwegian Airlines, which were in line with expectations.
The three property reits all remained under pressure with Green Reit having the worst of it, falling 4.7 per cent to €1.32. Ires Reit and Hibernia Reit were down 3.7 per cent and 0.6 per cent respectively.
Paddy Power Betfair fell 5 per cent to €111.70 as shares in the newly merged entity find their footing.
London
The FTSE 100 Index saw £34.9 billion wiped off stocks, as it plunged to a fresh three-and-a-half year low amid heightened fears over the state of the global economy.
London’s top flight dropped 2.4 per cent to 5,536 — its lowest level since July 2012.
Barclays was down 7 per cent , or 11.2p, to 147.9p, Standard Chartered off 5 per cent , or 20.7p, to 386.6p, while Royal Bank of Scotland dropped 4 per cent, or 9.5p, to 223.5p.
. Oil stocks also came under pressure as the price of oil fell more than 2% to 30.13 US dollars a barrel. The price of oil has plunged by more than 70 per cent since a peak in the summer of 2014.
BP fell 6 per cent , or 19.8p, to 310.2p, while Royal Dutch Shell dropped 0.8 per cent , or 12p, to 1445.5p and BG Group dipped 0.6 per cent, or 6p, to 1020p.
Defensive stocks fared well in the rout, with gold and silver miners Fresnillo and Randgold Resources up 45p to 875p and up 430p to 6130p respectively in the rush to safe haven investments.
Elsewhere, holiday firm Thomas Cook was up 4p to 99.8p despite reporting that bookings were down 2 per cent in "challenging" trading following the impact of recent terrorist attacks in popular tourist destinations.
Europe
Banking stocks were under fire again despite Wednesday’s bounceback as fears remained over the sector’s ability to withstand a slowdown in global growth. Investor confidence was hit further after France’s Société Générale became the latest player to warn over profits.
It scrapped a long-standing earnings target for the year ahead, blaming a rise in regulatory capital requirements and “the economic and financial environment”.
Soc Gen saw its share price dive 12 per cent , while Credit Suisse and German giant Deutsche Bank were heavily in the red, down 8 per cent and 5 per cent respectively.
Swedish banks such as Svenska Handelsbanken, Swedbank and Nordea Bank were down 4.3-5.3 per cent, extending falls after Sweden's central bank cut its benchmark repo rate by 15 basis points to -0.50 per cent.
Miner Rio Tinto dropped 3.4 per cent after the miner posted an annual loss and scrapped its promise to maintain or lift its dividend annually from this year onwards due to a tough outlook.
New York
Wall Street was off more than 1 percent on Thursday, pushing the S&P 500 and the Dow Jones industrial average down 10 percent for the year, as investors jettisoned stocks and scurried toward safer shores. All 10 S&P major sectors were in the red, led by financials, especially banks. The financial sector, already the worst performing S&P sector this year, dropped 2.71 per cent.
Federal Reserve Chair Janet Yellen stuck to her guns on her return to Capitol Hill on Thursday, saying a weakened global economy and steep slide in US equity markets is tightening financial conditions faster than the Fed wants.
US bank stocks, like their European peers, took a severe beating. The S&P 500 bank index was down 3.8 percent, led by Bank of America's 6.3 per cent fall. Boeing tumbled 10.5 per cent to $104.09 after a Bloomberg report said the US SEC was probing the planemaker over costs and expected sale of two jetliners. The stock was the biggest drag on the Dow, responsible for 68 points of the index's 310 point decline.
Additional reporting by Reuters
