Irish bank stock surge following Wall Street gains

THE shares of the two main Irish banking stocks have risen strongly, after the surge of the Dow Jones Index on Wall Street through the 10,000 mark had a galvanising effect on international stock markets. The Irish market - driven by phenomenal demand for the two main banks - rose by 1.6 per cent, with the ISEQ Overall Index up over 83 points to 5381.15.

The banks were also driven ahead by their recent enthusiastic endorsement from Morgan Stanley Dean Witter, who upgraded their recommendation for Bank of Ireland to a "strong buy" and put a €26.60 (£20.94 million) target price on the shares. Bank of Ireland shares soared by over 7 per cent yesterday from the overnight €18.10 to €19.40, while AIB was 55 cents higher on €15.55.

Dealers in Dublin said that the banks were also recovering from a period of weakness, which had seen AIB fall back by 20 per cent from the €18.10 high of earlier in the year. That high was the result of takeover speculation involving Lloyds TSB and Deutsche Bank, but since then the takeover fever has moved to other European countries, leaving AIB and Bank of Ireland to underperform to a degree where they fell to below the average rating for European banks.

Yesterday, however, the buoyant international mood helped the Irish market, although after European markets closed, the Dow Jones Index slipped below 10,000 again and ended significantly lower, losing 94.07 points to 9,903.55. Fears about upcoming earnings reports from the high-tech sector, particularly IBM, were blamed for the late decline. A virtuous circle that began with the Dow's unexpected advance on Thursday has now seen Tokyo soar by more than four per cent, prompting European markets to rise by one to two per cent and encouraging the Dow to head upwards again until it reversed in late trading. The Dow hit a high of 10,085.31 before falling back on profit-taking, with the quarterly triple witching later in the day encouraging rather than retarding the advance.

On London's stock market, Europe's largest, the FTSE 100 regained the 6,200 point level but later slipped from it for a gain of 0.8 per cent.

British Telecom climbed 2.62 per cent on prospects for a deal with AT&T Corp that would crack open the key Japanese market.

Germany's Xetra DAX index rallied to put on around 1.71 per cent, exceeding the 5,100 point level that traders had seen as its target for the day.

In Paris, a surge in luxury goods stocks added a touch of glitz with the sector boosted by bid speculation as PPR and LVMH circled Italy's Gucci.

The blue-chip CAC-40 closed up 1.62 per cent at 4,219.65, finally hurdling resistance at 4,200 after the Dow built on its record overnight close and surged above 10,000 in early trade.