The Irish stock market lost 137 points, or more than 2 per cent of its value, as news of the Gateway closure shook international investors' confidence in the Irish economy.

Weakness in overseas markets, particularly New York, also contributed to the sell-off, which hit financial shares especially hard.

"The market didn't take too kindly to news of Gateway," one trader said. "Any stocks with exposure to the Irish economy were hit and the banks were a prime target."

AIB and Bank of Ireland traded in large volumes and bore the brunt of the selling, the former losing four per cent of its value, or 52 cents, to close at €12.30, while Bank of Ireland shed 6.6 per cent, or 72 cents, to finish at €10.15.

Anglo Irish Bank, described by one dealer as "a pure Irish economy play", also suffered, dropping by nearly five per cent, or 20 cents, to €3.85 at the close. Irish Life & Permanent shed 22 cents to €12.97 but rival mortgage lender First Active held in well, gaining 4 cents to €3.16.

Aside from pharmaceutical stocks, industrial shares also outperformed their financial counterparts. CRH lost just one cent to €19.39 , Eircom was unchanged at €1.34 while Smurfit added 4 cents to €2.35.

But Elan, which accounts for around a quarter of the index, was badly hit, losing €2.57 to €60.20. Galen, despite reporting good results on Wednesday, was also down 29 cents to €11.88.

In the technology sector, Riverdeep fell by 20 cents to €5.00 despite announcing a narrowing of losses and a sharp rise in revenues in the fourth quarter. Iona shed €1.50 in Dublin to €18.50.