Financial stocks under pressure but late UK buyer emerges

FINANCIAL shares came under pressure on the Dublin market despite a broadly favourable background on bond and international equity markets.

But there were signs that the weakness in the financials may be coming to an end with a British buyer for AIB shares understood to be in the market looking for stock at the closing level. AIB ended the day down 2p on 388p while Bank of Ireland lost 3p to 497p. Irish Permanent was the only financial to go against the trend, gaining 2p to 480p but Irish Life suffered a sharp fall with a 6p fall to 265p.

After its good performance in London on Monday following the Salomon "buy" recommendation, Smurfit was less active and drifted 1p lower to 165p while CRH was hit by profit-taking and lost 7p to 617p.

The fall in Unigate's dairying profits in the UK shows the difficulties that the Irish processors are likely to be going through with their UK liquid milk operations. Unigate's reference to a reduction in milk prices suggests in the second half that margins are improving in the sector.

Adare was 5p firmer on 560p ahead of interim results next Monday while Waterford Wedgwood was unchanged but well-bid on 79p. Tribune had one of its rare deals on the Dublin market, trading unchanged on 1p.

Gilts were firmer and outperformed the German market, narrowing the yield gap against German bunds although the Irish market has still not performed as well as Italy and Spain in the latest bout of convergence trading.

Dealers in Dublin expect the current five-year yield gap against German bunds of 90 basis points to narrow towards 75 basis points in the weeks ahead.