AIB leading the way as international stocks surge

AIB has become the first Irish stock to exceed £5 billion in market value, as the Dublin market was among the international stock exchanges to hit a new high yesterday. The ISEQ index of Irish shares gained 1.4 per cent to 3576.95, with the financial stocks again leading the way. AIB shares stormed ahead 26p yesterday to 590p, having traded as high as 595p, and benefiting from strong overseas interest.

At last night's closing price AIB has a market capitalisation of £5.02 billion - its market value has also been boosted by the recent issue of 161 million new shares as part of its acquisition of Dauphin Deposit in the US.

Meanwhile, Bank of Ireland shares are just 2p away from breaking the £4 billion barrier.

The bank's shares rose on the back of strong sentiment in the UK for banking stocks. Most British banks interim results are due out in the next few weeks and are expected to be strong, according to analysts in London.

Dublin dealers were not surprised at the Irish banks' performance. "They have been tracking the British banks for a long time," said one trader, adding that the strong Irish economy was also a spur.

Another factor was that Bank of Ireland's £600 million acquisition of Bristol & West has been seen in a very favourable light by UK investors.

One London analyst said that banks have been under-weighted this year. "The sector is also generating very high levels of profit," he said. "The average return on equity this year has been 20 per cent but some banks have achieved returns significantly above that."

Stock markets in Britain, France and Germany also closed at record highs, helped by the stronger dollar which rose undeterred by a German statement on foreign exchange rates.

The UK's FTSE 100 index faltered on the brink of 5,000 points and eased off the day's best levels to end at a fresh closing high of 4,964.2, up 64.9 points but off the day's best and all-time peak of 4,991.8.

Liquidity, stock shortages and dollar strength were behind the FTSE rise, in which banks accounted for almost half the advance, with oils and pharmaceuticals also strongly ahead.

Stock markets in Europe received an extra boost when Wall Street opened higher on benign US June inflation figures.

The Dow Jones Industrial average made an early push across the 8,000 mark, then retreated when Kodak opened lower following the company's release of below-forecast second quarter results.

But the Dow recouped these losses, firming as the technology sector extended its mighty rally and last night it closed up 63.17 at 8,034.88 as technology stocks, such as Intel and Microsoft, gained strongly, benefiting from Intel's strong results published on Tuesday.

French shares ended at a closing high on Wednesday, with strong gains in luxury goods and drinks firm LVMH and semiconductor group SGS-Thomson, but were below an all-time high set earlier in the day. Dealers said the 3,000 level on the CAC 40 index could be tested.