Global stock markets surged yesterday, with Wall Street firmly in the driving seat. The Dow Jones Industrial Average rose 4.8 per cent to 2,255.68 and the Nasdaq closed up more than 5 per cent at 1,282.45.
In Dublin, share price values were boosted by €1.7 billion as the market took its cue from the rally overseas. The ISEQ index of shares closed 3.6 per cent higher, taking it back within sight of the key 4,000 level.
While the gains were not as strong as in leading European markets, dealers said Irish stocks tended to lag on the way up as investors turned their attention to the larger markets first.
All of the leading stocks made ground on the day, with Irish Life & Permanent turning in a particularly strong performance to close 8 per cent higher while CRH added 5.6 per cent.
Bank of Ireland shares remained in the spotlight, gaining 5.2 per cent after the bank published details of its offer to Abbey National, which was again rejected. Dealers said the stock was lifted by a general sense that the deal was now dead and speculation that the bank itself could become a takeover target. "There is a feeling that they are more prey than predator now," a trader said.
The Dow has risen 13 per cent in the past four sessions the biggest four-day rise in at least 12 years after touching a five-year low in the middle of last week.
Indices around the world were pulled along in the US market's slipstream as dealers responded to better-than-expected earnings from firms such as Citigroup, Johnson & Johnson and General Motors.
Europe's leading indices added their biggest one-day gain in over a decade as Frankfurt's DAX index rose 7 per cent to 3,048 and London's leading FTSE 100 index rose by 5 per cent to 4,130.
The strong US corporate earnings bolstered optimism on Wall Street. Mr Todd Leone, head of listed trading at SG Cowen, said: "There is a lot of real buying from institutions and program trading and the volume is good. I don't know if this is too much too soon but it is a very positive rally." However, analysts pointed out that expectations had been so low for this earnings season that the market was welcoming any positive news enthusiastically.
In July the banking sector was expected to exceed third-quarter operating earnings by 24 per cent compared with last year, according to estimates compiled by research group Thomson Financial. That was reduced to 8 per cent last week before the earnings reports, a sign of how confidence has eroded in recent months.
Mr Arthur Hogan, chief market analyst at Jefferies & Co in Boston, said: "When we wind down the earnings season next week, when the focus goes back to the economy and geopolitical issues, that is when we will test the conviction of this rally." Merrill Lynch said its stock market conditions indicator in its fund managers' survey released yesterday was at its highest level since November 2001. - (Additional reporting by the Financial Times Service)
