Share prices in Dublin rebounded firmly after the recent weakness which had driven the ISEQ below the 5300 level. The rebound came on the back of the employee cost index figures from the US for the first quarter of the year which showed costs rising by just 0.7 per cent despite the 4.2 per cent increase in American GDP in the same period. These employee cost figures suggest that a rate rise by the Fed is now highly unlikely.
Given the strength of the reaction on Wall Street and the comparative modest reaction in Dublin, dealers said that further gains in Irish share prices are likely when trading begins today.
Some of the special situation stocks were among the strongest yesterday, with Smurfit up 10p to a new high of 265p as merger candidates JS Corp and Stone performed impressively on the US market. Wall Street investment house Bear Steans has, however, warned that a deal between JS Corp and Stone may be difficult because of the potentially varying agendas of major JS Corp shareholders like Smurfit and Morgan Stanley and also the Stone family which owns over 12 per cent of Stone Container.
Despite some cautionary words from S&P about the size of the merged company's debt - $6.5 billion - both JS Corp and Stone were strong, with JS Corp up over $3/4 to $21 and Stone up $1/2 to $16 1/4 as the Irish market closed. Another special situation is Elan, which regained all of the losses it suffered after the announcement of the $700 million Neurex acquisition. Investors now seem to be taking a far more relaxed attitude towards the 5 per cent earnings dilution that the share issue to Neurex shareholders will bring this year and next. Yesterday on Nasdaq, Elan shares traded heavily and were up $4 at the Irish market close on $62 3/4.
Fyffes was the beneficiary of positive comment in The Analyst magazine which concluded that "all valuation yardsticks suggest the shares are substantially undervalued". The report said that Fyffes has the capacity to more than double its value to £1.4 billion within five years and that a discounted cash flow valuation of 384p suggests a net present value double the current share price. The shares were up 8p in Dublin to 193p - just shy of the recent high - and closed up 14p in London on 165p sterling.
Most of the leaders recovered some lost ground, with AIB up 15p to 980p while Bank of Ireland was 7 1/2p higher on £14.45. CRH gained 7p to £10.17 while Irish Life was 1p higher on 661p with Goodbody slapping an "underperform" tag on the shares and putting a year-end valuation of 535p to 699p on the shares, depending on the growth in the value of new business. Irish Permanent was 10p higher on 960p.
It wasn't all upward movement and James Crean suffered for yet another set of dismal results and lost 7p to 148p while Fitzwilton was 2p lower on 37p - its lowest level in six months.
The buoyant Nasdaq saw good gains by some of the Irish techie stocks, with CBT, Iona and Esat all recovering recent lost ground.
