Scepticism over merger pushes stocks lower

The market fell sharply, losing more than 3 per cent on foot of uncertainty on Wall Street and growing scepticism about Bank of Ireland's proposed link-up with Alliance & Leicester. Dealers said concerns were emerging about the significant exposure Bank of Ireland would now have to the British mortgage market.

"People are taking the bigger picture view that the UK mortgage market is not the best place to be. Meanwhile, if you want to buy the Irish story, you would be better off with AIB or Irish Life & Permanent, both of which will have more exposure to the Irish market," one dealer said.

Worries about the bank ceding management control at the top were also beginning to make themselves felt, traders said. Amid growing scepticism, Bank of Ireland's share price fell back to the levels at which it was trading before news of the deal drove the stock higher. It closed at €18.40 (£14.49) yesterday, down 5.2 per cent.

The worries about the proposed merger came on top of US and international weakness following Wall Street's soft performance on Monday. Frankfurt and London tumbled more than 2 per cent at one point yesterday with financial and telecoms stocks particularly badly hit.

The weakness fed through to other leading stocks. AIB shed 50 cents to €13.50 (£10.63), Irish Life & Permanent was down 11 cents at €12.25 (£9.65) and CRH, which has been weak in recent days following negative broker comment in Britain, lost 45 cents to €16.55 (£13.03).

However, Smurfit remained broadly steady, helped by the $40 a tonne increase in liner-board prices announced by Georgia Pacific which helped sentiment in the sector. Smurfit's share price closed just one cent lower at €2.44 (£1.92).

Waterford Wedgwood gained ground following the announcement that it was acquiring US luxury cookware maker All-Clad Inc for $110 million (€103.7 million) in a move that would expand its reach in the US. The stock closed at €1.00 (£0.79), a gain of five cents on the day.