The sell-off in European and US stock markets over the last few days is viewed by many analysts as a return to sanity after the exuberance seen towards the end of last year.
"This is a bit of a healthy correction, which brings some order back to the market. It's nothing more sinister," said Mr Bryan Allworthy, a European equity strategist at Merrill Lynch.
"The market was relatively disorderly in the closing weeks of last year when the techs, telecoms and media were on the run and private investors waded in and pushed valuations to what one could charitably say were fanciful levels."
Analysts also said equity investors were finally taking on board what had been apparent in bond markets for months - that interest rates in both the US and Europe were set to rise.
However, European stock markets are seen as less over-valued than their US counterparts, while strong economic fundamentals this side of the Atlantic - including low inflation, stronger profit growth, rising merger activity and accelerating economic growth - are expected to provide a firm floor to the region's shares.
Nonetheless, analysts believe that European markets may have further to fall despite a 6 per cent pull-back so far this week.
"To come back to fair value with bonds, you are talking about a 20 to 25 per cent pull-back based on a lot of the models," said Mr Matt Dennis, European equity strategist at ABN Amro bank.
But, due to benign inflation and corporate earnings growth in Europe, a more modest pull-back may be enough to put European shares back on their feet.
"A 10 per cent pull-back seems to be the magic number that many strategists work from. It's a reasonably good technical level and then you start to see a resumption in terms of sentiment," Mr Dennis said.
The Irish market, an underperformer last year, has held up relatively well to date, and analysts believe it continues to offer good value relative to its overseas peers.
"Dublin didn't participate as strongly in the fourth-quarter rally as other markets, so it has less to give back. It wouldn't really appear on anybody's radar screen as over-valued," one equity dealer noted.
In addition, it is not heavily exposed to the high-technology sector, which has been hit hardest of all.
Traders said volumes over the last two days had been relatively light with no evidence of panic selling by either institutional or retail investors.
"The Irish market represents good value, although we would be cautious enough about international markets," said Mr Robbie Kelleher, head of equity research at Davy Stockbrokers.
