The Iseq index of Irish shares plunged by 4.65 per cent today as financial stocks bore the brunt of renewed fears over the health of the global banks and fresh concerns over credit quality.
More than 200 points were knocked off the index which closed at 4,333.53
Overnight weakness in US banking stocks filtered through to Europe in the morning, leading to a sell-off of banking stocks as fears that the US government may have to step in to support mortgage companies Freddie Mac and Fannie Mae gained ground.
In Ireland, bank stocks were down by around 4.5 per cent on decent volumes by the close of business.
Irish Life & Permanent was the hardest hit as 45 cents was knocked off the value of its shares to leave it at €5.50, a drop of around 7.5 per cent.
Bank of Ireland also saw is shares plummet more than 7 per cent to close the day at €5.46.
AIB was 5.25 per cent weaker as it shed 45 cents to €8.13, while Anglo Irish Bank lost 28 cents to €5.72, a drop of just under 5 per cent.
Elsewhere, FBD was plummeted by more than 15 per cent, or €2.50, to €14, although this was largely due to the illiquid nature of the stock as only around 22,000 shares were traded.
Construction stocks also took a hammering as Austrian company Wienerberger led the European construction sector lower after cutting its profit outlook following the US homebuilding slump. Weak US housing data didn't help matters either.
Nearly 7 per cent was wiped off the value of CRH's share price as it slumped by €1.27 to €17.01 although volumes were weak. Grafton's shares were down 7.67 per cent as it lost 32 cents to €3.05, while Kingspan shed 26 cents to €6.56.
Greencore said in a trading statement earlier in the day that it was on track to deliver full year earnings per share within the range currently expected by analysts, but it didn't matter as concerns about the effects of sterling and the impact of deteriorating consumer sentiment on its UK operations put the stock under pressure and it ended the day 8.7 per cent weaker as it lost 20 cents to €2.10.
European stocks declined for a second day as concern deepened that financial firms would post more losses and reports signalled faster-than-forecast inflation.
Barclays was 5.4 per cent weaker and Societe Generale slipped 4.2 per cent after JPMorgan Chase said Lehman Brothers Holdings may write down about $4 billion in credit- related investments this quarter as the mortgage market deteriorates.
National benchmark indices declined in all the 18 western European markets. The UK FTSE 100 lost 2.4 per cent, and France's CAC 40 sank 2.6 per cent. Germany's DAX slid 2.3 per cent.