Nervousness ahead of the Federal Reserve's meeting on interest rates next week drove share prices sharply lower, with a belief in the market that the Fed will raise rates by at least a quarter point and may go as high as a half point increase. This uncertainty has driven up bond yields by 20 basis points over the past week and financial shares, in particular, have taken a pasting.

It was unfortunate that AIB's announcement of its £443.7 million (€563.4 million) investment in Bank Zachodni came as the market for financial shares tumbled. Analysts took the view that the Zachodni is very expensive at 4.1 times book value, but that AIB had little option but to bid high.

"AIB had to get this bank," one analyst stated. AIB shares fell 36 cents to €13.19 (£10.39), but this was almost wholly due to the weakness in the market and the price of the Zachodni deal was not really a factor.

Bank of Ireland fell heavily and closed 60 cents weaker on €17.05 (£13.43), well below its recent low in the wake of the Alliance & Leicester debacle, and 16 per cent off its €20.30 (£15.99) high immediately after news of the A&L first leaked.

Irish Life & Permanent was another financial to come under the cosh, falling 50 cents to €10.80 (£8.51). Industrials were less affected by the weakness and even those cyclical stocks which usually suffer from rate rises did little. CRH was just 2 cents easier on €18.10 (£14.25), while Smurfit drifted 2 1/2 cents easier on €2.325 (£1.83).

Elan continued to trade actively on Nasdaq, but some of the fizz seems to have gone out of the takeover talk, and the shares were almost $1 1/2

lower on $29 7/8 as the Irish market closed. Icon continued to improve and was trading $1 3/8 higher at $20 5/8 as the Irish market closed, a big improvement on the $10 low after the profits warning a few months ago.