Financial stocks surge on merger talk

The Dublin market surged by nearly 4 per cent as confirmation that Irish Permanent and Irish Life were at an early stage of merger…

The Dublin market surged by nearly 4 per cent as confirmation that Irish Permanent and Irish Life were at an early stage of merger talks drove the share prices of both companies higher.

The market was also helped by a strong performance in other European stock markets after Italy slashed a full percentage point off its official discount rate and amid expectations of further interest rate cuts in Europe.

"We have generally seen a steadying of markets over the last few weeks, brought about by rate reductions coming through," one equity dealer said. "The news from the Far East has not been as bad while a lot of stocks had been sold aggressively and represented good value," he added.

However, activity in Dublin was mainly confined to the leading stocks with the financial sector faring particularly well following news of the talks between Irish Life and Irish Permanent. The financial index gained 6.95 per cent as it again overshadowed the general index. Irish Life, which gained 10 per cent in London yesterday, firmed by 80p from Friday's Irish close and up 6p on an out-of-hours trade on Monday to finish at 600p while Irish Permanent surged by 135p to 995p as the market signalled its approval of the talks between the two parties. "The deal has gone down very well and on top of that we saw natural demand for the leaders," one trader said.

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Both AIB and Bank of Ireland made significant gains, the former adding 46p on Friday's close to 960p while the latter closed 82p higher at £12.45. Talk of further consolidation in the Irish financial services industry drove other financial shares higher as well with Anglo Irish gaining 4p to 160p and First Active up 28p at 348p.

Industrial shares fared less well, however. CRH was down 13p since Friday at 855p, Smurfit lost 4p to 105p while Greencore was up just a penny at 255p.