IRISH SHARES tumbled yesterday as turmoil gripped international markets as fears over banking stocks returned and uncertainty surrounded the US government's $700 billion bailout plan for its troubled banking sector.
The Dublin market was down more than 7 per cent at one stage as shares fell to their lowest level in 11 years before a minor bounce eventually saw it close the day 5.95 per cent - or 236.56 points - weaker at 3,739.45.
US president George W Bush sought to allay fears over the turmoil in global markets, telling world leaders at the UN's annual general assembly debate that he is confident Congress will pass the rescue package for Wall Street.
The US financial crisis and its ripple effect on markets worldwide dominated the opening day of the annual gathering, with several world leaders voicing concern in their speeches to the assembly.
Mr Bush warned that failure to act over the current crisis would be "devastating".
He added: "Our economies are more closely connected than ever before and I know that many of you here are watching how the United States government will address the problems in our financial system."
In Washington, US treasury secretary Hank Paulson and chairman of the Federal Reserve Ben Bernanke encountered hostility and anger from both Democratic and Republican legislators as they sought swift backing for their plan, which would create a $700 billion fund to purchase "toxic" mortgage assets held by financial institutions.
During a lengthy meeting of the Senate banking committee, the two men urged senators to approve the plan quickly to avoid the threat of "a continuing series" of bank failures and frozen credit markets.
Republican senator Jim Bunning said the initiative was "un-American" and amounted to "financial socialism".
"This proposal is stunning and unprecedented in its scope and lack of detail," said Senator Christopher Dodd, the Democrat who chairs the committee.
Despite the scepticism, the US president said he was confident that Congress will move in the "urgent timeframe required" to prevent the crisis deepening.
Earlier, in a meeting with Pakistan's newly-installed president Asif Ali Zardari, Mr Bush described congressional misgivings over his administration's bailout proposals as part of the "natural give and take" between the branches of government.
In his address to the assembly, French president Nicolas Sarkozy went further than Mr Bush, urging a complete overhaul of the global financial system and calling for a summit of the world's main economic powers before year's end to "examine together the lessons" of the crisis.
"Let us rebuild a system where banks will do their job, and the job of banks is to finance economic development. It is not to fuel speculation," he said, adding: "Let us build together a regular, regulated capitalism."
After financial stocks plunged by about 10 per cent in overnight trading in the US, European markets opened sharply down yesterday and remained that way for the day as investors worried about the future of the rescue plan.
"Clearly it is just a systemic fear across the board of anything to do with financial stocks and that the problems will not be solved in the short term or any term that we can see in the horizon," said one Dublin broker.
"It is all pretty much revolving around this new rescue plan in the US and until that gets sorted and details of how the plan is going to take shape are clear, the market is really struggling for any momentum. Uncertainty is the worst nightmare and there is plenty of it around at the moment," said another trader.
Banking stocks bore the brunt of the Irish sell-off. With the exception of AIB, financial stocks were in freefall, with Bank of Ireland and Anglo Irish Bank among the hardest hit on concerns that the slowdown will continue to weigh on earnings and increase bad debts.
