Irish shares lost nearly 1 per cent in value as leading European markets fell sharply in jittery trade ahead of the release of key US jobs data later today.
Technology and telecommunication stocks led European shares lower amid fears that the figures would point to a rise in US interest rates.
"There is a contagion effect from the US, no doubt about it, and technology is on the take-profits list," said Mr Paul Horne, European equity market economist at Salomon Smith Barney in London.
A recovery on Wall Street, which shook off early losses to close 1.12 per cent higher, came too late to rescue European shares from their downward spiral. In London, the FTSE tumbled to its lowest close since March, losing more than 2 per cent, while German shares dropped nearly 3 per cent and French shares closed 2 per cent lower.
Irish shares did not escape the general weakness and the ISEQ index of shares finished 45 points lower. Industrial shares were responsible for most of the fall, with the battered financial sector showing some signs of recovery. AIB, which lost more than 11 per cent in value earlier this week, clawed back some of its losses to end more than 2 per cent higher at €11.70 (£9.21), while Bank of Ireland also added 20 cents to finish at €8.70 (£6.85).
But the turnaround in the financial sector was not enough to offset the weakness in other stocks, particularly Telecom Eireann which was hit by poor sentiment towards the sector in Europe. It lost 32 cents to close at €4.45 (£3.50), its lowest level since it was floated in early July. Analysts said recent results from some firms, allied to a challenge to the EU anti-competition commission over the rates set by Deutsche Telekom to competitors buying into its network, had led to concerns about incumbent operators in particular.
"There is vulnerability across the technology and telecoms stocks. People became very nervous after Internet stocks were sold off in the US because that's the bubble a lot of people have been waiting to see burst," one Dublin trader said.
Meanwhile, the euro broke through $1.08 to hit three-month highs following the publication of strong European economic data. The main indicator of economic confidence in the euro zone rose to 104.2 in July from 103.8 in June.
