MARKET REPORT: The stock market closed 0.9 per cent lower, dragged down by weakness in the two leading banking stocks and general softness in overseas markets.

Bank of Ireland shed 45 cents, or 3.6 per cent, to €12.05, while AIB slipped by 30 cents, or 2.2 per cent, to €13.60, mirroring weakness in financial stocks overseas.

Dealers also said that the strong buying of the banks last week, amid expectations that they would be included in the Eurostoxx 50, had dried up as investors questioned how much further they could go on the news.

Despite reports of new entrants to the mortgage market, Irish Life & Permanent remained strong, finishing 10 cents higher at €12.90 although First Active shed three cents to €4.85.

Dealers reported good buying interest in some of the mid-cap stocks including Glanbia, which gained 14 cents to €1.55 ahead of interim results in early September.

More than 1.6 million shares in the food group changed hands as Davy pointed out that Idaho, where Glanbia is the biggest dairy processor, is now the fifth largest milk producing state in the US.

Kerry Group was another beneficiary of buying interest ahead of its half-year results, adding 15 cents to €14.80, while DCC added 40 cents to €10.40. Pharmaceutical group Galen also remained in demand, adding a further 18 cents to €6.80.

More than 960,000 Alphrya shares were traded as the company's share price sank another 10 cents to €1.30 but dealers said the stock, which has suffered since its recent results announcement, may have found a floor.