European blue chips pared the session's sharp losses but remained near six-year lows today as New York opened with modest losses and as war fears hit fever pitch ahead of a speech from UN arms inspector Dr Hans Blix.
In Dublin the ISEQ index of Irish shares continued to struggle. The benchmark is down 135 points to 3,828.97 this afternoon, a loss of 3.4 per cent with banks suffering the heaviest losses.
AIB is down 64 cent at €12.17, a loss of 3.4 per cent, Bank of Ireland and Anglo Irish Bank are showing similar percentage losses.
European insurance stocks such as ING Group and Aviva led bourses down amid renewed solvency concerns as investors fretted over the sinking value of the sector's equity holdings, although talk of forced selling was unsubstantiated.
Strategists warned there could be worse to come for markets, as investors braced for President Bush's State of the Union address tomorrow night amid expectations for a call for war.
"Valuations are attractive and sentiment is not completely depressed yet, but we could head that way over the next few days," said Mr Khuram Chaudhry, a European equities strategist at Merrill Lynch.
By 2.40 p.m., the FTSE Eurotop 300 index was down 2.3 per cent at 779 points as the benchmark sank for the ninth straight session to levels last seen in the spring of 1997. The Eurotop 300 is around 55 per cent off its peak in September 2000.
In New York, the Dow Jones industrial average slid 0.9 per cent and the tech-laden Nasdaq Composite fell 0.8 per cent.
UN arms inspectors Dr Hans Blix and Mr Mohamed ElBaradei will appear before the UN Security Council this afternoon. Dr Blix is expected to be critical about Baghdad's cooperation in the search for weapons of mass destruction in Iraq, but not come to a conclusion on whether Iraq is rebuilding its arsenal.
"Relative valuations are irrelevant, no one wants to put money into equities until George W. Bush decides whether or not the US is going to war with Iraq," said Mr Stuart Fraser, a European fund manager at Standard Life Investments.
"If we go to war tomorrow then the markets should bounce as this crippling uncertainty is removed." he added.