The Irish stock market fell by more than 5 per cent in early trade before bargain hunters entered a very nervous market and rescued it from its lows. It eventually closed 3.17 per cent lower at 4,366.70.

The volatility in Dublin mirrored the behaviour of other European markets, which halved early losses of over 4 per cent, bolstered by improved expectations for the Dow open and some covering of short positions before the weekend.

But markets remain extremely jittery as investors continue to seek sanctuary from the domino effect of the financial chaos in Russia and fears of escalating problems in Latin America.

In Dublin, dealers said liquidity was again very tight with most of the leading stocks falling in very low volume before some institutional investors came back into the market to mop up stock at the lower levels.

"We saw some buyers bottomfishing in the late morning before the US opened which is a good sign as it suggests they made an independent decision to buy the Irish market," one dealer noted.

Although most of the leading stocks recovered from their morning lows, they ended weaker on the day.

Financial shares again suffered most with AIB losing 45p to 980p and Bank of Ireland dropping 45p to £11.15. Irish Life closed 20p lower at 555p while Irish Permanent was off 60p at 740p.

Industrials fared better than financial shares with CRH down 13p at 765p, Smurfit off 7p at 130p and Greencore 20p lower at 280p.