Speculation about further interest rate reductions continued to swirl around European stock markets yesterday but Irish share prices failed to benefit from the interest rate optimism and closed little changed on the day.

Greencore provided one of the few talking points in the market as rumours of a possible merger with rival IAWS resurfaced but few traders were putting much faith in the talk. "A merger is out there as a possibility and has a certain identifiable logic but a lot has to happen for it to occur," one dealer noted.

Instead, traders attributed the rise of almost 22p in Greencore shares to 280p to the stock's defensive qualities which were finding favour in an uncertain investment climate. Dealers also said the shares weren't hurt by a strong performance on Monday from British sugar producer Tate & Lyle. Its shares gained 70p to 420p sterling after it announced that it was at an advanced stage in talks over the sale of its specialist feed milling business Universal Milling Technology to Gencor. Meanwhile, IAWS shares were unchanged in Dublin at 260p.

Elsewhere in the Irish market, both banks firmed with AIB gaining 8p to 958p and Bank of Ire- land up 20p to £12.70. But Irish Life and Irish Permanent suffered some further profit-taking and both stocks ended 12p lower at 580p and 940p respectively. First Active lost 5p to 355p.

Among industrial stocks, Smurfit firmed slightly, gaining 2p to 118p despite news that ratings agency Moody's had lowered its rating for its US associate Jefferson Smurfit Corporation. The agency also warned of further downgradings if JS Corp's merger with Stone Container did not achieve its targeted $2 billion (£1.3 billion) worth of asset sales.

By contrast, CRH, which has made strong gains of late, lost some ground. Its share price closed 15p lower at £10.05.