Markets will get jitters after US plunge
They will also surely react to a report published in Britain today which says a prolonged Gulf War could result in soaring oil prices and shrink the United States' economy.
The Institute of Directors' report warns that if the conflict were to escalate, oil prices could go as high as 80 dollars a barrel, the US stock market fall by 30% and its gross domestic product contract by 2% this year.
But the IoD, which represents 55,000 businesses, stresses the scenario is unlikely. On Friday, the Dow Jones closed down more than 238 points at 8131, losing the gains recorded so far this year.
The ISEQ, the FTSE and other European indices are expected to suffer from severe volatility.
All the major European bourses were down as they shadowed the weak trading in New York.
On Friday, the FTSE 100 fell to a seven-year closing low, down 18.5 points or 0.5% to 3,603.7, amid continuing concern about a possible war on Iraq, worries over corporate profits and declining consumer sentiment.
The pharmaceutical sector was down after news that GlaxoSmithKline halted trials of Serevent, following a number of patient deaths. Shares closed down 43p at £10.87.
The ISEQ followed suit with its own half-point loss, closing at 3,964.93 after a volatile week.
The Irish index is now 144.5 points lower than at the start of the year's trading on January 2.
A fall in the FTSE today will mark the 11th negative day's trading in a row.
However, Irish analysts say the quality of leading stocks has in some way protected the market from the same selling spree currently seen on the continent.
There is still concern that Irish stocks will suffer if the trends overseas continue.
Pension funds have already taken a hammering and many fund managers are now reassessing their portfolio mixes. In Britain, some 13.5 billion (£9 billion) has been wiped off the pension funds of the FTSE 100 companies in the last 10 days alone. Reports yesterday said the total deficit on these pension funds has risen to an alarming £82 billion in the past 13 months.
Analysts are not expecting any positive news this week as the latest economic indicators are released.
More job losses are due to beannounced in the City today, with top broker Goldman Sachs shedding 200 workers.
In the US, analysts say the war drums are weighing heavily on the markets.
"It has affected sentiment, absolutely," Wells Capital Management chief investment officer James W Paulsen told the New York Times yesterday. "If you're at a management committee meeting, it tends to influence whatever you're talking about.
"Can I hire somebody? Can I make that investment commitment?
"The best thing that can happen is to get it out of the way."
US president George W Bush was left in no doubt about the effects of the current uncertainty when he met with 15 senior economists at the White House last week.
"What was said and he didn't disagree with this is that uncertainty hampers investment decisions, and that markets don't like uncertainty," said Brian S Wesbury, chief economist at Griffin, Kubik, Stephens & Thompson, an investment firm in Chicago.
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