The ISEQ Index of Irish shares fell 1.24% on Monday as Irish stocks echoed the turmoil seen in other markets across Europe, the US, and Japan.
In Japan, shares at one point exceeded the losses experienced during the stock market crash of October 19, 1987, which came to be known as “Black Monday”. The country’s benchmark index, Nikkei, fell by 12.40%.
European shares fell to near six-month lows, with only a handful of stocks trading in the green.
The pan-European STOXX 600 index was down more than 3% to its lowest since February 13, before paring back to end the day 2.17%. Germany’s DAX, France’s CAC 40, Britain’s FTSE, and Spain’s IBEX 35 all fell more than 2%, before again paring back losses in afternoon trading.
In a bruising session for all the European sectors, energy hit a six-month low, tracking lower oil prices, while utilities touched an over one-month low. Banks also tumbled to a four-month low.
In Dublin, stocks performed better than in many other countries. AIB saw the largest drop, down 4.21%. Homebuilders Cairn Homes and Glenveagh Properties saw their shares drop by 2.2% and 1.47% respectively, while shares in Dalata Hotel Group fell 1.97%.
When US markets opened they joined the sell-off. About 90% of the shares in the S&P 500 were hit, with the index seeing its sharpest fall in almost two years.
The global rout comes amid fears of a US recession, which sent investors fleeing from risk while wagering that rate cuts would be needed to rescue growth.
A worryingly weak July payrolls report in the US on Friday saw markets price in a 78% chance the Federal Reserve will not only cut rates in September, but ease by 0.5%.
The managing partner at Erlen Capital Management, Bruno Schneller, said: “Signs of emerging weakness in the US economy are evident, with negative indicators from hiring, retail sales, and purchasing managers index reports.”
Mr Schneller noted, however, that economic data like GDP and trade remained stable while the prospect of autumn US rate cuts approached.
The US stock plunge is vindicating some of Wall Street’s most prominent bears, who are doubling down with warnings about risks from an economic slowdown.
JP Morgan Chase & Co’s Mislav Matejka said stocks are set to stay under pressure from weaker business activity, a drop in bond yields and a deteriorating earnings outlook.
“This doesn’t look like a ‘recovery’ backdrop that was hoped for,” Mr Matejka wrote.
Focus is now set to return to central banks and when a fresh round of interest rates cuts will come into play.
Traders now see a 78% chance of a 50-basis-point US Federal Reserve rate cut in September, while bets of a second cut by the European Central Bank stand at 88%, according to LSEG data.
- Additional reporting by Bloomberg and Reuters.