The Iseq fell to its lowest level in more than a decade as fears over banking stocks continues to haunt international markets and uncertainty surrounds the US government's $700 billion bailout plan for its troubled banking sector.
"It is all pretty much revolving around this new rescue plan in the US and until that gets sorted and details of how the plan is going to take shape are clear, the market is really struggling for any momentum. Uncertainty is the worst nightmare and there is plenty of it around at the moment," said one trader.
The Irish market more or less went down in a straight line from the off this morning, led by Bank of Ireland and Anglo Irish Bank on concerns that the slowdown will continue to weigh on earnings and increase bad debts caused financial stocks to fall.
The Dublin market was down more than 7 per cent at one stage before a minor bounce eventually saw it close the day 5.95 per cent - of 236.56 points - weaker at 3,739.45.
With the exception of AIB, financial stocks were in freefall. Both Bank of Ireland and Anglo Irish Bank were trading down 17-18 per cent at one stage before a small bounce at the end of the day brought them off their lows.
Bank of Ireland ended the day 13.65 per cent weaker as it shed 64 cent to €4.05 with around 14 million shares traded. Anglo Irish saw 13.19 per cent wiped off the value of its share price as it dropped 62 cent to €4.08. Irish Life & Permanent fell back 41 cent to €7.56.
However, AIB avoided the banking bloodbath and was nearly 3 per cent better off at €6.07 by the time the market closed with brokers attributing the gains to feelings among some investors that the stock is now undervalued compared to its peers.
The market wasn't helped by the fact that CRH received a downgrade from Merrill Lynch in the morning. It was down the bones of 10 per cent at one stage but bounced a bit towards the close to eventually end the day at €15.50, a drop of 8.2 per cent or €1.39.
Yesterday's huge spike in oil prices also impacted shares. Although oil retreated back to $107 after its largest one day gain, a number of stocks were still feeling the pain from the rise.
Ryanair which said earlier in the day that it remains unhedged for its fuel needs beyond the end of this year, saw 7 cent shaved off its share price to close at €2.48.
European stocks fell for a second day as Federal Reserve Chairman Ben Bernanke warned that financial markets are under "extraordinary stress" and a slump in metals and oil dragged down commodities producers.
The Dow Jones Stoxx 600 Index slipped 1.7 per cent to 267.70 as of 4:37 p.m. in London. The gauge has erased about half of an 8.3 percent rally on September 19, when the US government announced plans to stem credit-related losses. The Stoxx 50 slid 1.2 per cent and the Euro Stoxx 50, a measure for the euro region, also retreated 1.1 per cent.
National benchmark indexes decreased in all 18 western European markets. The UK's FTSE 100 lost 1.6 per cent as British Airways and Man Group declined. France's CAC 40 dropped 2 per cent and Germany's DAX retreated 0.6 per cent.