Investors are bracing themselves for another rollercoaster ride on world stock markets after the US Nasdaq market plunged lower again last night. Just two days after a surprise cut in US interest rates sent the index soaring 14 per cent, the Nasdaq was once more heading sharply lower, with concerns about the strength of the US economy coming to the fore again.

The index closed at 2,407.32, down 6.21, per cent, on worries that a slowing economy is beginning to hit company profits and more immediate fears that US banks could be facing credit problems. The Dow Jones closed down 2-1/4 per cent, closing at 10,667.30.

The market was unnerved by the suspension of Bank of America's stock yesterday amid rumours that it had suffered large losses in derivative trading. In a statement, the bank denied any significant trading or derivative losses adding that it remained comfortable with the quality of its loan book in 2001.

Rumours that troubled California utilities had drawn down a line of credit from the bank also swirled around the market.

Financial stocks immediately took a pounding with the reverberations being felt across European markets.

Irish shares were weaker with the ISEQ index shedding almost one percentage point to end the week at 5,639.23 with financial stocks taking the brunt of the fall. Bank of Ireland and AIB suffered most, dragging the index lower.

The speculation exacerbated residual fears that the economic pullback was souring corporate profits, just two days after the Federal Reserve lowered key interest rates by half a percentage point in a surprise move that began an explosive rally in stocks.

Analysts remain sceptical that a cut in interest rates is sufficient to allay concerns about a slowing US economy. Mr Bill Meehan, chief market analyst at Cantor Fitzgerald & Co, said it was difficult to make the case that an interest rate cut was the solution to all problems. New economic data pointing to a slowing economy dampened sentiment even further. The Government announced that the US unemployment rate had held steady at 4 per cent in December as the number of workers on payrolls grew modestly.

Mr George Rodriguez, senior vice-president at Guzman & Co, said that after digesting the news of the rate cut and the euphoria, the market was now believing the rate cuts to mean there was more weakness and a greater slowdown in the economy than had been expected.

--(Additional reporting by Reuters)