With London and New York markets on their holidays, trading in Dublin slowed to a trickle with the heaviest traded stock - Smurfit - only involving 158,000 shares. On that level of turnover, investors should pay little heed to yesterday's price movements.

The only price movement of note was the two-cent gain to #1.18 by Eircom as e-Island and Valentia submitted their indicative bids for the telecoms group. Greencore gained nine cents to #2.65 ahead of interim results next week while Ryanair was 21 cents higher on #13.10.

The Irish market might have performed strongly this year, outperforming European benchmarks by more than 7 per cent. But Davy Stockbrokers believe that the current good run is unlikely to last and that the ISEQ could fall back to 5,500 - a fall of almost 12 per cent - over the summer months "if the international rally unravels as we suspect it might".

Davy's bearish view is based on the narrowing of the valuation gap between Irish stocks and their European peer groups. Irish banks are currently trading on 12 times forecast earnings while the banks' European peers are trading on a rating of 13 times. But Davy states that earnings for these European banks are expected to grow more rapidly than the Irish banks. The three big industrial stocks - Elan, CRH and Ryanair - are all trading on a premium to their sectors, Davy adds.

"We believe it will be difficult for the market as a whole to make further progress relative to the rest of Europe from current levels. A crude methodology for establishing `fair value' is to obtain a weighted average of relevant international sector multiples using weights derived from their importance in the Irish market. That exercise yields a fair value 2001 market multiple of 16 times, close to where the Irish market was trading on Friday," Davy states.