The Irish stock market staged a mini-revival, clambering back above the 4,000 level as hopes of lower US interest rates briefly banished worries about the power vacuum in Russia.

European markets climbed steeply as Wall Street got off to a strong start, surging by 3.8 per cent shortly after it opened following a three-day holiday weekend amid renewed optimism that further US interest rate cuts might be in prospect.

The Dow's strong performance gave heart to a bruised Irish market and the ISEQ gained 3.78 per cent to close 148.29 points higher. "We lagged international markets on Monday so there was scope for a rebound yesterday. Things were particularly strong in the afternoon once the US got going," one trader said.

Activity was again mainly confined to the bigger stocks and the two leading banks were among the chief beneficiaries. AIB gained 55p to 875p while Bank of Ireland was also 55p higher at £10.75. Other stocks to recover included Irish Life, up 11.25p at 460p, and Irish Permanent which gained 30p to 760p.

In the industrial sector, CRH firmed by 25p to 860p, Smurfit was up 12p at 110p, Greencore gained 30p to 300p and Kerry was 15p stronger at 745p.

The revival in global markets came as hopes of lower US interest rates drove out concerns over instability in Russia where the Duma rejected Mr Viktor Chernomyrdin's nomination as prime minister for the second time.

Such hopes were fuelled by weekend comments by US Federal reserve chairman, Mr Alan Greenspan, who said he no longer regarded inflation as the primary threat to the US economy and suggested he was more inclined to cut than raise interest rates. But dealers warned that the causes of the recent crisis had not gone away but had just been pushed temporarily into the background.