€4.5bn lost in another black day for Irish shares

IT was another black day for Irish shares yesterday which lost about €4.5 billion and saw 4.7% wiped from share values.

Yesterday’s carnage was prompted by further concerns over the extent of the exposure of banks to the high-risk lending (subprime) conducted in the US for the past few years.

That debt is estimated at 200bn, but nobody can be certain of the true figure, said Goodbody Stockbrokers chief economist

Dermot O’Leary.

“Transparency was still a key issue and the reports from US banks this week will be crucial in determining the state of the markets in the period ahead,” he said.

The decision by the US Federal Reserve Bank on interest rates will also be crucial to easing tensions in the global money markets, he said.

Mr O’Leary warned that the crisis would not ease however, until it became clear what exposure banks have to the subprime market in the US.

The problem has arisen because US banks lent irresponsibly and passed off much of that risk to banks across the world.

Until that exposure is fully quantified, Mr O’Leary said stock markets were likely to stay volatile.

That volatility was reflected across global markets yesterday as nervous investors continued to dump bank and property-related shares.

In Dublin, those sectors were heavily traded as punters sold shares and put their money into safer havens, said one analyst.

By late evening the extent of the carnage was apparent with AIB Group, the country’s largest group by market value, losing nearly 6.5% of its share value or €1.11 to end the day at €16.28.

Bank of Ireland, whose value has lagged its arch rival for some time was hit hard also as it lost just short of 6% on the day. It was down at €11.28 in late trading.

Anglo Irish bank has been one of the strong performers of the banking sector for some time. It was hit hard also as it lost over 7% of its worth on the day to end at €11.71.

However, construction has also been out of favour as the property markets across the world lose momentum and CRH was down 3.5% on the day despite announcing a €2bn-plus deal to buy substantial interests of Cemex, the Mexican cement giant in the US and Europe.

Other stocks suffered also yesterday and mining and oil stocks also lost significant value.

Tullow Oil, which has been doing well in west Africa with significant oil finds, lost over 5% of its value in Dublin yesterday while in mining Glencar lost significant value on the day.

Brokers are hoping that the anticipated interest rate cut from the US Federal Reserve later today will help restore some confidence to the market in the days ahead.