Stocks on Wall Street have recovered earlier losses triggered by the announcement that telecommunications giant, WorldCom, had overstated its accounts by $3.85 billion.
The US financial watchdog, the Securities and Exchange Commission, said WorldCom's accounting improprieties were of an "unprecedented magnitude".
Speaking at the G8 summit in Canada, President Bush described the scandal as outrageous and said there would be a full investigation.
The company now faces bankruptcy and the revelation adds to the crisis of confidence among investors after the collapse of the energy giant, Enron.
In Dublin the ISEQ was down 3%. Markets elsewhere in Europe fell around 4% on average but closed just 2% down.
In the US, WorldCom shares were suspended on the high-tech NASDAQ index after plunging to just 10 cents.
Based in Clinton Mississippi, WorldCom has admitted overstating its income by $3.8 billion over the past 15 months. Its profits are now losses.
Last night the company fired its Chief Financial Officer and ordered that 17,000 jobs be cut immediately.
WorldCom's accounts were audited by Arthur Andersen, the firm which performed the same task for Enron. Anderson has said WorldCom had withheld information.
The Securities and Exchange Commission – the main regulatory body in the US – has issued a statement to say that Worldcom disclosures confirm that accounting improprieties of unprecedented magnitude have been committed in the public markets.
WorldCom's entry into the Irish marketplace dates back to 1995, when it acquired a 30% stake in the Irish telecommunications company, TCL Telecom. In 1997, WorldCom bought the company outright.
Meanwhile the US Federal Reserve has decided to keep US interest rates unchanged at 40-year lows. The basic rate remains at 1.75%.
The more symbolic discount rate, charged to banks for loans directly from the Federal Reserve, was also unmoved at 1.25%.
The widely expected decision came amid growing market unease stemming partly from a mounting toll of accounting scandals and with the economy still edging ahead very unevenly.
