THE Iseq index of Irish shares slumped to its lowest level since November 2016, mirroring moves in European shares as investors moved to shed risk.
The market was gripped by turbulence for a second consecutive day, with sharp falls at heavily weighted stocks almost pushing the index through the 6,000 level.
Cement giant CRH - the most heavily weighted stock on the index - lost more than 3pc yesterday, while Aryzta lost almost 7pc as chairman Gary McGann pleaded with investors to back the company's €800m capital raising plan. Bank of Ireland and Smurfit Kappa also weighed on the index, each losing more than 3pc. The Iseq closed down almost 2.2pc at 6018.81.
European stocks also fell to the lowest level since late 2016, building on sharp declines in Asia amid growing concern about whether a global sell-off was merely a market correction or the start of a deeper rout.
Europe's Stoxx 600 dropped 2pc in a second day of losses, with declines in all sectors, as World Bank chief Jim Yong Kim warned of worsening trade tensions. Insurance as well as oil and gas shares were the benchmark's biggest laggards, ending 3.2pc and 3.1pc lower, respectively. That mirrored trends in Ireland where Providence Resources lost more than 8pc, with the oil price being dragged lower. FBD lost almost 4pc.
Italy's FTSE MIB, the worst performer among regional markets this year, declined 1.8pc, entering a bear market. Concerns about Italy's debt burden and the fiscal policies of its new government are weighing on European sentiment.
A sell-off in US stocks accelerated in afternoon trading yesterday. The S&P 500 fell more than 2pc, the Dow Jones Industrial Average lost as much as 600 points and the Nasdaq 100 Index was down almost 10pc from an August record.
The S&P 500 was on a six-day slide of almost 7pc in what is the longest slump of Donald Trump's presidency.
US companies are increasingly fretting over the impact of the burgeoning trade war, while the US Fed has been raising interest rates, helping force a repricing of riskier assets like stocks as returns on bonds rise.
John Lynch, chief investment strategist for LPL Financial, told clients that "volatility is back and it may require more active strategies", adding: "Volatility is also not to be feared, but embraced, as varying data points will cause bouts of market anxiety. But remember that fundamentals are still strong."
Additional reporting Bloomberg