The Irish stock market clawed back some of its losses yesterday, as European and Asian equities were buoyed by expectations of further interest rate cuts by the US Federal Reserve.
The Iseq index closed up 1.2 per cent, with sentiment among traders reflecting the late rally in US stock markets on Monday evening. But the volume of shares traded was not particularly heavy - suggesting caution on the part of investors - while two major banking stocks, AIB and Anglo Irish Bank, ended the day in the red.
Positive share price performances from Bank of Ireland, building materials group CRH and Ryanair lifted the Dublin market in line with European stock markets, after president George Bush's State of the Union address on Monday night and ahead of a House of Congress vote on a $146 billion economic stimulus plan aimed at averting a US recession.
Globally the mood among investors remained nervous amid persistent concerns that the US economy might be slipping towards recession.
The Federal Reserve is widely expected to follow up last week's unscheduled reduction in the Fed funds rate with a further half a percentage point cut to 3 per cent today.
Meanwhile, some positive data for the world's biggest economy emerged yesterday.
Energy and utility shares led a bullish session for US equities, after new figures showed that orders for durable goods climbed 5.2 per cent in December - the biggest increase in five months.
Although US consumer confidence fell in January, sentiment was not as weak as expected, leading some analysts to suggest that the US economy might be in better shape than is feared. "This is not the kind of data that recessions are made of," said Alan Ruskin, chief international strategist at RBS Greenwich Capital.
However, large US corporations have now shifted into recession mode and are preparing to cut costs, freeze hiring and reduce capital spending.
Economic optimism among US-based chief financial officers polled by Financial Executives International fell 10 per cent in the final quarter of 2007 compared to the previous three months.
In the currency markets, the dollar got a modest lift against the euro and the Swiss franc from the durable goods data, although activity was muted ahead of the Fed decision.
Sterling was supported by a Confederation of British Industry report that indicated UK retail sales this month had held up relatively well - suggesting that the Bank of England might not cut interest rates as aggressively as had been previously thought.
The focus in commodities markets remained on precious metals as gold and platinum set fresh record highs. Gold peaked at $933.10 an ounce and platinum touched $1,735 as a power supply crisis in South Africa kept alive uncertainty about supplies of both metals.
Oil prices were little changed ahead of this week's Opec meeting in Vienna.
