Market Report - Dublin

The decision by the US Federal Reserve to cut interest rates helped to lift the Dublin market yesterday after a week when signs of recovery have emerged after a sustained period in the doldrums.

The decision by the Federal Reserve provided a spark for stock markets around the world, although most could not hold on to all their gains.

Bundesbank officials have played down the likelihood of any near-term interest rate cut there.

Analysts say markets are also likely to focus on political efforts to stabilise the Japanese banking system in the coming week. European markets perceived the US rate cut as one way to handle the slowdown caused by the global financial crisis. However, many interpreted the decision as a sign that the central bank was worried about the slowdown in Asia having a significant impact on America in particular.

The statement from the Fed pulled no punches, predicting that "unsettled conditions in financial markets are likely to be restraining aggregate demand in the future".

Despite this, in Dublin the ISEQ was firm for a large portion of the week, and on Monday made its biggest one-day gain to date, when it rose by 6 per cent. Dealers pointed out that the volumes were still light. Much of the increase in the ISEQ's value has come from gains in the financials. For example, AIB started the week at 835p; by yesterday it had climbed to 955p despite the current controversy over bogus non-resident accounts. Bank of Ireland started the week at a flat 974p, but closed yesterday at £11.60 in large volumes. The rumour machine in Dublin helped to push up the share price of Irish Life during the week. Irish Life went up on the back of rumours that a British institution was considering a bid for the company. By yesterday the rumour had disappeared, but Irish Life's price still rose from 505p to 530 3/4 p. Irish Permanent also benefited from the rumour mill, rising yesterday by 50p to 840p.

Despite worries about its merger with Stone, the Smurfit share price has risen by about 9p since the start of the month. In comparison to other companies in its market, the share price has performed relatively well.

Some analysts also point out that Smurfit has the potential to recover any lost ground if the merged group reduces its debt through asset disposals. Yesterday there was a busy trade in the stock and it fell by 4p to 102p, having hit 115p at one stage.