The global stock market rout that has roused fears that the world is heading into recession has cost Irish shares over €7bn in just two weeks of trading since the start of the year.
The Irish stock market yesterday plunged by more than 2% as the new year sell-off advanced across the US, European and Asian exchanges on fears that China’s economy, the second largest in the world, was faltering.
A further slide in the price of crude oil this week to $30 a barrel, although helpful for oil-importing economies, has further roiled the Chinese currency and oil stocks.
David Holohan, chief investment officer at Merrion Capital, said that, across the world, the torrid start to the new year had revived memories of the dark days of 2009.
Focus has fallen on China whose economy has been growing a lot slower that official data suggested, but the stock market rout “is clearly being driven by fear, and rationality will return to markets”, Mr Holohan said.
Capital Economics in London also yesterday said it believed “concerns related to growth in China and subsequent market turmoil have been overdone.”
The oil price plunge ncreased the chances of a “V-shaped rebound”, it said.
Shares in Intel, the world’s biggest semiconductor maker, tumbled as much as 10% on Friday on first-quarter sales that were held back by the continued slump in demand for personal computers.
Across Europe, shares fell to their lowest since December 2014. Copper also hit a six-and-a-half year low.
“Stocks are being driven by oil, and given that the Iranian sanctions are due to be lifted, that’s causing even more nervousness about this glut of oil that we have,” said Zeg Choudhry, managing director of Lontrad.
Chinese shares closed at their lowest level since December 2014.
Enrico Vaccari, fund manager at Italy’s Consultinvest, said investors were testing central banks to see whether they had ammunition left to prop up markets and the economy. The ECB holds its next policy meeting on Thursday.
Emerging-market stocks slumped to the lowest since 2009, set for a third straight weekly decline. Russia’s currency led declines among developing nations.
Additional reporting: Reuters and Bloomberg
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