Nearly €1.5 billion (£1.18 billion) was wiped off the value of Irish shares yesterday as news of Gateway's closure of its Dublin computer assembly plant rattled the Irish stock market.
Dealers said the news spooked international investors who responded by selling Irish shares, particularly in the financial sector.
"The Gateway news caused a shift in sentiment among overseas brokers," one Dublin dealer said. "They are afraid the Celtic Tiger has gone into a tailspin and is going to die. The banks have the largest exposure to the Irish economy so they were sold."
The two leading banks bore the brunt of the selling as AIB lost 4 per cent of its value, or 52 cents, to close at €12.30 while Bank of Ireland lost 6.6 per cent, or 72 cents, to end at €10.15.
The market wasn't helped by a poor performance in overseas stock markets on foot of further weakness on Wall Street, on top of the Dow's 165-point fall on Wednesday. In a double whammy for stock markets, the US Federal Reserve's 'beige book' report showed the slump in manufacturing was infecting other areas of the economy. This was followed by figures showing a big jump in the number of Americans seeking first-time claims for jobless benefits in the last week.
The weakness on Wall Street sent European markets lower with technology and telecom shares hardest hit.
Mobile phone giant Vodafone Group proved one of the main drags on the London market, sliding 3.3 percent to £1.38 sterling, as dealers said the stock was hit by rumours that a large placing could be in prospect.
Vodafone wiped 14 points off the blue-chip FTSE 100 index, which closed down 73.6 points, or 1.3 per cent, continuing a steady slide from four-week highs hit last week and heading towards July's trough below 5,300 points.
"People are still on tenderhooks, although more than previously, they are looking for a bottom in the market," Commerzbank strategist Mr Michael O'Sullivan said.
Meanwhile, Germany's Dax shed 1.8 per cent and the French stock market lost 2.0 per cent.
The value of the Irish market was also hit by pharmaceuticals group Elan, which accounts for around a quarter of the ISEQ index and was another big loser, dropping 4 per cent or €2.57 to €60.20.
Dealers said all eyes were now on Wall Street to see where markets would go from here.
