AFTER spending most of the week coat tailing share price movements in New York, the Dublin market finally breathed a sigh of relief yesterday, as the eagerly awaited US employment report did not turn into the horror story that many had feared.
Job growth in the US last month may not be enough in itself to justify another interest rate rise from the Federal Reserve. But few in the markets are complacent enough to believe that the latest mini crisis for the markets is over. Investors all over the world are still nervous about the strength of the American economy and, despite yesterday's figures, believe that interest rates in the US are more likely to rise than fall. Those who make their living buying and selling shares for institutional investors in the Irish market will definitely be hoping that stock markets are not heading for a tailspin. With commissions slashed by 40 per cent to 0.25 per cent, any weakness in the Irish market which results in a reduction in turnover could have a severe impact on the brokers.
Some of the brokers were putting the best face on the cut in commissions, suggesting that this was a voluntary move on their part, reflecting how much they value the institutional business. But the reality is that the brokers were led kicking and screaming to a cut in commissions with some domestic fund managers making it clear that they were no longer willing to pay 0.35 per cent in Dublin when they could deal through a London broker for 0.25 per cent.
Overseas fund managers who have been paying increasingly close attention to the Irish market and the attractions of the Celtic Tiger also find it difficult to accept the difference in dealing costs between Dublin and London. Irish brokers may have tried to justify their higher costs by emphasising the quality of their research on the Irish market - but a 40 per cent differential!
The brokers case was not aided by the recent Irish Association of Investment Managers survey of brokers' commissions, which showed that Irish fund managers alone paid out £8.7 million in commissions last year, a jump of almost 50 per cent on 1995.
If stock market turnover remains at the level of last year; and the first quarter of 1997, the impact on the brokers is likely to be limited. But if hikes in US rates lead to a general move away from equities then brokers - even those owned by the banks - will feel the squeeze. In that sort of situation, the brokers have only two options - boost revenues or cut costs.
On the corporate front, it was a week of minimal activity, with the continued shake up in the Waterford Wedgwood share register the only real highlight. With Mr Peter Goulandris having mopped up half of the remaining Morgan Stanley holding and Fitzwilton set to buy the rest within the next few weeks, the O'Reilly influence on Waterford Wedgwood will be reinforced.
Next week sees results Golden Vale and Smurfit and neither are expected to make particularly rosy reading. For Golden Vale, the main interest will be on the level of exceptional items and also on what plans new chief executive Jim Murphy has to restore the group's ailing fortunes.
