Irish Permanent and Irish Life provided the main focus of attention in the Irish market when trading resumed in Dublin after the bank holiday but by the end of the week, overseas developments were again driving Irish shares.

The news that the State's largest mortgage lender and its biggest life assurer were in merger talks helped shares off to a strong start on Tuesday when the ISEQ index gained nearly 4 per cent, fuelled by talks of further consolidation in the financial sector.

The market gave up some of its gains mid-week but closed yesterday on a high note, buoyed by a strong performance from European equities and a good start on Wall Street amid hopes that a new Group of Seven package will spell an end to recent financial market turmoil. Markets welcomed the deal which aims to strengthen the global financial system and head off future crises. They particularly welcomed news that the International Monetary Fund would get an extra $90 billion (£60 billion) in resources.

G7 comments that the risk to the world economy was now low growth, not higher inflation, also helped, encouraging talk of lower world interest rates even after data showed third-quarter US growth was 3.3 per cent, well above the 2.1 per cent expected.

Dublin followed the upward trend overseas, gaining 2 per cent as most of the leaders ended higher. Dealers said the Irish market was also being helped by hopes of further interest rate reductions here in the not too distant future. Both banks ended higher as did the large industrial stocks. AIB closed 24 1/2p higher at 959 1/2p in a late sterling deal, Bank of Ireland was up 38p at £12.30 and Irish Life firmed 10p to 590p. Irish Permanent lost 5p to 955p, however, despite a statement from Moody's rating agency saying a merger between Irish Life and Irish Permanent would be positive for the combined group's future credit ratings.

CRH, which confirmed that it had acquired a further 47 per cent of Holding Cement Polski to take its total stake in the group to 96 per cent, continued its recent rally by gaining 50p to 975p.

Dealers said some second-line stocks, which had taken a beating of late, had also begun to show signs of perking up. IWP was 25p higher at 190p, Greencore was up 20p to 260p and DCC gained 25p to 415p. Powerscreen, which held its annual meeting in London yesterday, was up 49p to 125p in Dublin although it gained just 7p in London to 105p.