The Irish equity market staged a modest afternoon recovery after dipping below 5,300 earlier in the day, encouraged by a firmer performance in most European markets and a strong start on Wall Street as fears of an imminent rise in US interest rates eased.

The ISEQ index, which slipped to a low of 5,292, rebounded later in the day and clambered back above the 5,300 level to end just 15 points down. "We tracked Europe down on Monday and we tracked it back up again today," one dealer said, adding that volume generally was light with a focus on stock picking. Several of the leading stocks recovered from their morning lows in the afternoon although some remained in the doldrums.

AIB bounced back from a low of 930 to close at 955p, a gain of 5p on the day, but Bank of Ireland did not prove so fortunate and finished 20p lower at £14.30. CRH also remained weak, closing down 20p at £10.

The main corporate news of the day came from Smurfit which confirmed recent speculation when it announced that its 46 per cent-owned US associate JS Corp was in talks with Stone Container about a merger. Smurfit cautioned that the talks would not necessarily lead to a merger, but the view in the market is that the logic behind a merger between the two groups is compelling.

Dealers said there was little reaction to the news as it had already been factored into the share price which hit a high of 260p on Monday as rumours of the deal intensified. In addition, there were so many variables in the equation that it was hard for analysts to quantify the impact of a deal, brokers said. The share price gained just 3p to 256p.

Elsewhere, Irish Permanent lost 15p to 950p and Irish Life was 3p weaker at 667p. Among second-line stocks, Ryan Hotels hit 100p, an all-time high for the stock, ahead of the release of full-year results today.