The volatility in the Far East which saw the Hang Seng Index fall once again - albeit a more modest 3.7 per cent - carried through to stock markets in Europe with both Dublin and London giving up goodly portions of Wednesday's recovery of nearly 5 per cent.

The Irish market closed down 1.6 per cent and volatility is expected to be the pattern of trading for some time to come.

"The weakness in Asia overnight hit London and other European bourses this morning and that has reinfected the Irish market," one dealer said, "We've seen a fair bit of selling, with financials again taking knocks and some of the second-liners now beginning to suffer as well."

Financial shares took something of a beating, with Bank of Ireland down 20p to 828p while AIB was 10p lower on 560p. Both banks are being linked with possible bids for privatisations in the Czech Republic, where the government is expected to give the go-ahead for the sale of up to four state banks next month.

"The banks have been the biggest out-performers of late and are being hammered on the way down. "They are also the most liquid stocks so they have shown the biggest price movements in recent days," a dealer said. Other financials were also weaker. Irish Permanent off 23p to 637p while Irish Life was 2 1/2p lower on 350p. Anglo Irish continued to trade busily and was marginally weaker on 109p. Hibernian was down 10p to 450p.

Among the industrials, Smurfit was hit by a downgrade by Goldman Sachs from "outperformer" to "market performer". In plain English, Goldman has shifted its Smurfit recommendation from a buy to a hold. The shares closed down 10p on 195p after eight deals with the market paying little attention to the possibility of a £20 million bid for Norcor.

Waterford Wedgwood was 1/4p easier on 78p but sentiment towards the stock has turned a bit negative with some investors concerned about the effect on sales in the Far East.

CRH lost 20p to 790p but looked oversold at the close. Others to lose were DCC - down 14p to 451p ahead of results next week and Green - down 15p to 400p.

Some of the second-liners which missed out on Wednesday's rally gained ground yesterday. Ardagh was 3p higher on 120p ahead of today's full-year results, Irish Continental was 30p higher on 800p. Readymix also bucked the trend and chalked up an 8p gain to 218p. "There has not been a huge trade (in Readymix), it is just well bid," one trader said.

Another to rise sharply was Ryanair, which closed up 20p on 345p, making last Tuesday's 290p price difficult to explain rationally, while IAWS gained 2p to 252p.

Elsewhere Avonmore/Waterford was 2 1/2 p higher on 260p, Golden Vale was 4p higher on 78p but Kerry Group was off 5p at 805p.