Irish shares closed more than 1 per cent lower, knocked by a weak performance in international markets.

However, dealers noted that, as in the past, the Irish market outperformed on the way down and its losses were nothing like as extensive as in other European markets.

The banks led the way, with AIB shedding 13 cents to €13.17, Bank of Ireland also losing 13 cents to €11.80 and Irish Life & Permanent 10 cents lower at €13.60. But Anglo Irish bucked the trend to gain eight cents to €6.38. However, dealers said Irish banks outperformed their international peers, leaving AIB with a remote chance of inclusion in the Eurostoxx 50 index.

"It's unlikely but not impossible," one dealer said.

Leading industrials also lost ground with CRH closing 10 cents lower at €14.60 while Ryanair lost nine cents to €6.21.

A batch of results from second-line stocks had relatively little impact. Good first-half figures from Grafton still left the stock seven cents weaker at €4.25 while Arnotts lost 10 cents to €10.60 despite reporting better-than-expected interim results.

Glanbia's 9 per cent rise in first-half pre-tax profit also saw its shares close one cent lower at €1.55, although the stock traded in good volume with more than 1.3 million shares changing hands.

Elan was one of the biggest losers on the day, dropping 75 cents to €2.85 in Dublin as its recent run on foot of takeover speculation came to an end.

Other hard-hit stocks included Riverdeep, down 37 cents at €2.43, and Alphyra, off 18 cents at €1.02.

In London, Vodafone shares fell by more than 6.5 per cent as telecom stocks were hit by bad news from Canadian company Nortel.