MARKET REPORT:THE IRISH market yesterday suffered the biggest drop since January 5th, 1983, as fears over the stability of Irish banks grew following the nationalisation of three European banks and the takeover of another troubled US financial institution.

The Iseq fell by 493.25 points, or 13.0 per cent, to drop back to 3,291.52 points, its greatest decline in a quarter of a century and biggest ever one-day drop.

Prices fell across the board with only three stocks finishing the day in positive territory - McInerney, TVC Holdings and Prime Active Capital.

Financial stocks led the sell-off on the Irish market, as investors showed their concerns about the Irish banking sector. The sell-off was described by a broker as being even more sinister than usual due to the lack of activity from short-sellers, who were banned from trading in financial stocks by the Financial Regulator last week.

Anglo Irish Bank suffered the most, as its share price was almost halved, declining by € 1.98 or 46.2 per cent, to € 2.30. This is the steepest drop experienced by the bank since at least January 1987.

Irish Life Permanent also declined drastically, as it saw its share price shed € 2.18 or 37.9 per cent to hit € 3.57.

Ireland's two largest banks performed marginally better than their counterparts, with Bank of Ireland shedding 83 cents or 20.2 per cent to fall back to € 3.27 and AIB dropping € 1 or 16.7 per cent to close the day at €5.00.

Construction stocks were also hit hard with CRH losing € 1.58 or 9.3 per cent to fall back to € 15.37 and Grafton declining by 30 cents or 8.7 per cent to close the day at €3.15.

Defensive stocks performed a little better with Kerry Group losing just 15 cent or 0.1 per cent, while property firm McInerney went against the trend to increase its share price by 4 cents to € 0.35.