The market powered ahead yesterday, moving up by more than 4 per cent at one stage before closing 3.27 per cent higher.

The financial sector was the clear driver behind the increase, with all the banks marking significant gains by the end of the day.

Dealers said the mood in the market as a whole had been lifted by a growing sense that the worst of the credit crunch was already priced into the market.

Anglo Irish did particularly well, rising by 94 cent to €13.95. AIB climbed by 63 cent to €17.92, while Bank of Ireland was ahead by 46 cent at €13.56. Irish Life & Permanent was the strongest of the lot, rising by €1.30, or 8 per cent, to end at €17.50. FBD rose by €1, or 4.55 per cent, to €23.00.

The construction and housing-related stocks also had a reprieve. CRH led the charge with an 80-cent jump to €29.15, while McInerney gained 5 cent to close at €1.41. Grafton was up 19.6 cent at €8.40 and Kingspan rose by 88 cent to €16.62.

CPL also did well, having been punished by the volatility of recent sessions. Shares climbed by 25 cent to €5.35.

Smurfit Kappa was strong after hosting an analyst site visit in the Netherlands, rising by 22 cent to €16.32.

Few stocks were on the losing side yesterday, with a poor performance from UTV standing out for the wrong reasons. Shares in the media group shed 61 cent on low volume to finish at €5.09. Paddy Power also weakened, falling by 41 cent to €24.49.

Kerry declined by 30 cent to €20.97, while fellow food stock IAWS was down by 9.8 cent at €15.68. Greencore had a better day, rising by 14 cent to €4.70.

C&C was also in favour, gaining 22 cent to close at €6.30 ahead of next week's results.

Tullow gained 13 cent to reach €8.70 after a positive trading update for a well in Uganda.