The Irish stock market surged by almost 1.75 per cent to clamber back above the 5,000 level, driven by a strong performance from financial stocks and the two main banks in particular.

Sentiment was also helped by a strong performance in other European markets which shrugged off stronger-than-expected US June jobs data.

French shares closed at an all-time high while Germany's DAX index set a fresh 1999 high although the British market closed broadly unchanged, suffering something of a hangover in the wake of Thursday's 170-point surge.

"The third quarter started with a bit of a bounce back in Dublin," one dealer said. "There was some realisation that the Irish financial sector is out of kilter with the rest of Europe."

The financial index gained over 2.2 per cent yesterday as Bank of Ireland surged by 3.6 per cent to close at €17.15 (£13.51), a gain of 60 cents on the day, while AIB added over nine cents to close at €13.55 (£10.67). Irish Life & Permanent also fared well, gaining 42 cents to end at €10.77 (£8.48).

Industrials did not fare quite as well although the general index of shares still gained a credible 1.4 per cent.

Among the stocks to benefit was Smurfit, which dealers said was bolstered by an "outperform" rating from Morgan Stanley Dean Witter which has set a €3 (£2.36) target for the shares. The stock ended eight cents higher at €2.50 (£1.97) yesterday.

CRH also gained ground, firming by 30 cents to €18.10 (£14.25).

Greencore, however, was becalmed at €3.03 (£2.39) while Waterford Wedgwood lost two cents to finish the week at €1.03 (81p).