IRISH shares rose for a third day, as heavyweights such as Elan and Smurfit posted gains. The banks had another awful day, as Central Bank governor Patrick Honohan said Irish banks are likely to face higher potential loan losses than previously feared.
The ISEQ rose for a third straight day, closing up 16.57 points, or 0.6pc, at 2,909.94 points as Elan surged 7.6pc to €5.18 and Smurfit jumped 7.5pc to €5.18 on hopes that the expanding world economy will prompt demand for their products.
Allied Irish Banks closed down 7.2pc at a record low of 25c as the Government prepares to take a 93pc stake in the lender and the company spent its last day on the country's benchmark ISEQ Overall index.
The bank, listed on the benchmark since 1983, will transfer today to the junior Irish bourse, the Enterprise Securities Market, and cancel its listing on the London stock exchange.
There was no respite for the other banks as Central Bank governor Patrick Honohan told Reuters that the banks' prospective loan losses "will probably be a little larger" than previously feared after the economy slowed following the Central Bank's last review of the banks' finances in March 2010.
Bank of Ireland closed down 4pc at 34c, while Irish Life & Permanent was 3.3pc lower at 83c. Aer Lingus fell 2.9pc to €1.01 as the airline continues to cancel flights due to industrial action.
Stocks elsewhere in Europe dropped after Britain's economy unexpectedly shrank in the fourth quarter. The benchmark Stoxx Europe 600 Index lost 0.7pc to 280.10 at the close in London. The gauge rose on Monday amid optimism that economic reports this week will show the US economy is gathering strength.
European stocks last week posted their first weekly decline this year. National benchmark indexes fell in 13 of the 18 western European markets. France's CAC 40 dropped 0.3pc, the UK's FTSE 100 lost 0.4pc and Germany's DAX slid 0.1pc. Spain's IBEX 35 tumbled 1.4pc.
"The sovereign-debt crisis is an issue that will come and go through the whole year and will create volatility," said Markus Wallner, a senior equity strategist at Commerzbank in Frankfurt.
Stocks tumbled after the UK's Office for National Statistics in London said Britain's gross domestic product fell 0.5pc in the three months through December after increasing 0.7pc in the previous quarter.
"The weak GDP figure has thrown a spanner in the works for the Bank of England," said Manoj Ladwa, a London-based senior trader at ETX Capital. "An interest rate hike to counteract inflationary pressures would be easier to justify if the economy was pushing forward, but given the fragility of the recovery, policy makers are once again left in limbo."