The stock market closed nearly 2 per cent lower yesterday, affected by a weak performance from financial shares and Eircom. "Financial shares were hit by the sell-off in the UK and weakness in international bond markets," one dealer noted.

A report from Moody's Investors Service, which said that the long-term prospects for banks were generally good but that there were questions about the economy's short-term prospects, did not help.

AIB shed 60 cents, or nearly 4.5 per cent of its value, to close at €12.82 (£10.10), Bank of Ireland lost 22 cents to €8.20 (£6.46) and Irish Life & Permanent dropped by 50 cents to €9.90 (£7.80). Only First Active, which announced plans to cut costs by closing 25 of its 76 branches and shedding 175 staff, managed to buck the general trend, gaining five cents to €2.40 (£1.89).

"The move was well-flagged and is very necessary, with their market being squeezed on both the lending and deposit side," a trader said. However, he said that while the news was welcomed in the market, the shares had found it hard to advance significantly against a backdrop of general weakness in the sector.

Industrial shares performed better than their financial counterparts, although Eircom took quite a beating, dropping 18 cents to close at €3.95 (£3.11).

By contrast, Esat shares firmed in the US, helped by a positive note from Credit Suisse First Boston, which set a price target of $75 for the shares, traders said. By the close of business in Dublin, the shares were up 12.5 per cent at $65.25.