Shares fall again despite positive US data

Shares across Europe and the US fell again yesterday, despite receiving an early boost from positive US housing data.

The Dublin market moved lower in line with the trend, closing 0.8 per cent lower after a well-spread sell-off.

Elan fared worse than most stocks, losing 2.3 per cent, but the main financials and industrials were also hit.

Confidence was poor from the start, with Tuesday's lower US close setting the tone in early trade. An afternoon uplift in the US did little to improve the general mood as investors correctly worried that a sell-off would come in New York.

One Dublin dealer said US investors appeared to be day-trading, without wishing to take the risks attached to overnight ownership.

Around Europe, London's FTSE 100 index and Frankfurt's Dax each lost 1.6 per cent, while Paris's CAC 40 shed 1.3 per cent and the Swiss Market Index was down 1.2 per cent in Zürich.

Worries that inflationary pressures may force central banks to tighten monetary conditions further, just at a time when global economic growth is giving signs that it is peaking, has sparked frantic bouts of equity sell-offs. Cheaper valuations may lure investors back to equities soon, but confidence may take longer to come back, observers said.

"The market may well recover in the next three to four months but not necessarily in the same direction. Investors will come out more risk averse and will go into less adventurous, more defensive sectors such as food and banks," said Ivan Sedgwick, head of equity sales at Société Générale.

The trend was positive in early Wall Street trading but, by the time European markets had closed, it too had slipped back.

The attempted rally unravelled after data on housing and durable goods gave conflicting signals about the health of the US economy and the direction of interest rates.

The data added to the uncertainty that has sent markets reeling amid violent swings in commodity prices and a global rout in emerging markets. - (Additional reporting, Reuters)