The Irish stock market staged a modest recovery yesterday, with the Iseq index of Irish shares gaining 1.15 per cent after losses of 4 per cent wiped €4.8 billion from the market on Wednesday.
But the recovery fell short of the gains in other European markets, which rose by 1.5-2.5 per cent. In London, the FTSE 100 rose 2.21 per cent.
The Irish Stock Exchange's performance was relatively patchy, with Wednesday's heaviest faller, AIB, recovering less than 1 per cent of the 6 per cent it dropped on Wednesday, when negative economic data from the US took their toll on European markets.
However, packaging group Smurfit Kappa had its second successful day of conditional trading in a row, jumping 8 per cent.
The stock, which traded as high as €18.90 yesterday, closed at €18.79, an impressive climb on Wednesday's listing price of €16.50. Shares in the company are reported to be between five and six times oversubscribed.
The US market struggled to make gains yesterday, weighed down by cautious comments from former Fed chairman Alan Greenspan on the US subprime (borrowers with poor credit histories) mortgage market.
After the violent swings of Wednesday, Wall Street equities appeared set for a mundane session as some of more fevered worries over the crisis in the US subprime mortgage market subsided.
However, early gains were eroded after Mr Greenspan warned that rising defaults in subprime mortgages could spill over into other areas of the economy.
But Merrill Lynch economist David Rosenberg said results from Goldman Sachs and Lehman Brothers this week had quashed concerns - for the time being - that the subprime mortgage problems would affect financial sector profitability.
There were also positive signals from Bear Stearns, the biggest US underwriter of mortgage-backed bonds. Announcing an 8 per cent rise in first-quarter profits yesterday, it said rising subprime loan delinquencies were not hurting other markets.
Credit Suisse's strategy team argued that fear on markets was sometimes contagious but most of the time exaggerated.
"The news flow from the housing and mortgage markets is unlikely to get any better any time soon. However, the key to whether or not fears of an economic recession and a far more serious correction in equity markets materialise rests on the shape of the news flow from the labour market and the corporate sector," it said.
"Here we are more optimistic. In short, the labour market will inevitably soften relative to its more robust performance earlier in the cycle, but this need not trigger a recession since corporations appear to have shown none of the excesses that normally precede a recessionary outcome."
