The Irish stock market fell 1.7 per cent yesterday as international weakness and caution ahead of the US Federal Reserve's interest rate decision today combined to drag the index down.

Financial markets were hit by fresh pessimism as more poor corporate news from Europe and the US came to light.

The downturn, which saw the UK stock market hit a 12-week low, was tempered slightly by stronger-than-expected data from the US as investors grasped for signs of recovery in that economy.

The US Conference Board said its broad index of consumer attitudes rose to 117.9 in June from an upwardly revised 116.1 in May against forecasts of a slight dip to 114.2. Any comfort taken from the data was soon eroded by a warning from US financial house Merrill Lynch that second quarter profits in the US would be sharply below analysts' expectations due to weak stock and debt-trading operations. Irish financial stocks fell in relatively thin trade mirroring a dismal performance by the sector in the UK.

AIB dropped 26 cents to #13.14, Bank of Ireland shed 40 cents to #11.30 and Irish Life & Permanent lost 40 cents to #13.85.

Ryanair reversed Monday's gains as its share price fell 39 cents by the close of business yesterday to #12.06, hit by profit-taking. The stock rose 2.38 percent on Monday following the announcement of a strong set of results.

CRH dropped 50 cents to #19.50 while Smurfit shed 2 cents to #2.15.

One of the few stocks bucking the trend was Kerry Group which saw its share price rise 65 cents to #13.40 benefiting still from Monday's news that the food company had agreed terms with Golden Vale for Kerry's #238.7 million takeover offer.

Kerry has offered one new Kerry share for every 10 Golden Vale shares plus 13 cents per Golden Vale share in cash, with a full cash alternative of #1.5 per Golden Vale share.