EU summit agreement lifts markets

FTSE: 5,571.15 (+1.42%) Mid-250: 10,932.13 (+2.28%) Small Cap: 2,977.54 (+1.25%)EQUITY, COMMODITY and peripheral sovereign debt markets rallied in unison yesterday as EU leaders surprised investors by reaching agreement on certain measures aimed at tackling the debt crisis.

A Dublin broker described yesterday’s market moves as a “big risk-on rally” on the back of the political developments that unfolded overnight at the EU summit.

The broker said markets were still very much “trading off headlines”, as details were still scant, but said yesterday’s developments would provide a “foundation” from which risk appetite could “build off”.

DUBLIN

BANK OF Ireland emerged as one of the star performers on the Irish market yesterday as investors speculated that the financial institution would benefit from the agreement to inject funds directly into banks from the ESM fund. The stock closed almost 15 per cent higher at 10 cents.

“Irish financials were definitely catching a bit in this market,” one analyst said.

However building materials giant CRH was the main driver behind the Iseq’s 2.5 per cent gain. The stock, which is the index’s largest constituent, rose about 5.6 per cent, or 80 cents, to finish at €15.11.

Drinks manufacturer C&C, which forecast continued earnings growth for its current financial year in a trading update issued on Wednesday, had a good run yesterday, adding 18 cents to close at €3.39.

Elsewhere, exploration stock Petroneft Resources gained more than 7 per cent on the London Stock Exchange on the back of a positive operations update.

LONDON

UK STOCKS rallied the most in more than a week after euro area leaders agreed to ease conditions on bailout loans to Spanish banks and pledged to spend $152 billion to stimulate the region’s economy.

Wolseley led construction-related shares higher, climbing at least 4 per cent.

A gauge of mining shares rallied 2.6 per cent as copper advanced the most since November in London. Lead, nickel, tin and zinc also climbed. Vedanta Resources surged 4.7 per cent to 912 pence, Antofagasta gained 4 per cent to 1,088 pence and Rio Tinto Group, the world’s third-largest mining company, climbed 3.6 per cent to 3,019 pence.

Lloyds paced a rally in European banks, climbing 3.9 per cent to 31.1 pence. RBS gained 4.3 per cent to 215.3 pence and HSBC, Europe’s largest lender, increased 0.5 per cent to 561.1 pence.

The FTSE 100 Index surged 78.09 points, or 1.4 per cent, to 5,571.15 at the close in London, extending its monthly advance to 4.7 per cent, the biggest since October. The gauge has still lost 3.4 per cent this quarter, erasing its gain for the year, as European Union policymakers struggled to contain the sovereign debt crisis.

EUROPE

EUROPEAN shares closed at a seven-week high yesterday, after fresh measures taken by European leaders to tackle the region’s debilitating debt crisis boosted benchmark equity indexes and battered bank stocks such as UniCredit.

The FTSEurofirst 300 index closed up 2.6 per cent at 1,021.39 points – its highest closing level since May 11th.

A gauge of European banks was the among the best-performing industry groups on the Euro Stoxx 600, rallying 3.6 per cent.

Spain’s benchmark IBEX index rose 5.7 per cent, while Milan’s FTSE MIB rose 6.6 per cent, marking its best gain since May 10th, 2010.

Banks were among the best-performing stocks, with Italy’s UniCredit surging 14.3 per cent while Intesa rose 11.6 per cent. Spain’s BBVA rose 9 per cent, with Santander up 6.9 per cent.

NEW YORK

US STOCKS surged in early trade yesterday. The broad rally of 2 per cent gave the S&P 500 its best day in three weeks and helped the benchmark index trim its quarterly loss to about 4 per cent.

Bank stocks were among the market leaders as the KBW bank index jumped 2 per cent. Shares of Citigroup rose 2.7 per cent to $27.09.

US-traded shares of Research In Motion tumbled 18.5 per cent to $7.44 in the wake of the company’s decision on Thursday to delay the make-or-break launch of its next-generation BlackBerry phones until next year.

Nike shares dropped 7.3 per cent to $89.86 a day after the world’s largest sportswear maker missed quarterly profit estimates for the first time in at least two years.

Shares of KB Homes rose 11.6 per cent to $9.71 after the fifth-largest US homebuilder reported a narrower second-quarter.

“We are getting a relief rally,” said Christopher Orndorff, at Western Asset Management in Pasadena, California. Europe’s deal “appears to be a step in the right direction”.

By end of trade, the Dow Jones gained 277.83 points, or 2.2 per cent, to 12,880.09. – Additional reporting: Bloomberg/Reuters