Markets hit new peaks as rate fears fade

INTERNATIONAL stockmarkets have shaken off fears of higher interest rates to reach new record levels. Last night Wall Street surged higher, with the Dow Jones industrial index gaining more than 100 points. The gains on Wall Street had earlier pulled European markets higher, with the Dublin market among those to close at a new record.

A strong rise in technology stocks pulled the US market higher last night, with the Dow Jones closing 101.6 points higher at 6,544, a gain of almost 1.6 per cent. London, Frankfurt and Paris all followed Wall Street higher.

In Dublin the ISEQ index of Irish shares ended IS points higher at a new closing record of just over 2,740. The bond market steadied after Thursday's fall on interest rate fears - although prices are still down on the week. Bank of Ireland was again in strong demand, rising 10p to 550p.

However, the nervousness about interest rates following Thursday's credit figures did hit the money market. The figures showed that credit growth in November was 16.4 per cent, up from 14.4 per cent in October. Shorter term rates on the money market rose with the key one month rate rising from 5.75 per cent to 5.875 per cent, reflecting nervousness that the Central Bank could move in the weeks ahead to push up rates to try to stem credit growth.

Interest rate and inflation nerves had also affected other international markets earlier in the week, but these were forgotten yesterday. On New Year's Eve the Dow had lost 101 points, identical to yesterday's gain, but a recovery from further losses late on Thursday and a strong rise yesterday encouraged European markets.

Europe's three key bourses, London, Frankfurt and Paris, closed up 9.8, 1.5 and 1.1 per cent respectively, recouping about half of the steep losses made on Thursday.

In London, the FT-SE 100 index closed up 32.1 points at 4089.5, though volume was thin with many players still on holiday. The underlying mood was also cautious with most strategists not expecting the FT-SE 100 index to repeat its near 12 per cent growth in 1997.

French stocks also followed US shares, extending their earlier gains and the blue chip CAC-40 index, which traded nervously in the morning, closed higher 25.79 points at 2,282.76.

Germany's electronically traded IBIS DAX index rose 42.45 points to 2,863.26 points, boosted by interest from German domestic fund managers and a strong performance from German Bunds, as well as Wall Street.

In New York, the stock of microprocessor giant Intel and other computer companies surged after Wall Street analysts issued bullish forecasts.

The technology heavy Nasdaq Composite Index rose strongly. Intel rose $5.25 to $135.625 in afternoon trading on the Nasdaq market.

"We continue to see upside earnings surprise potential for the major US semiconductor producers and recommend purchase of selected equities, including Intel," Merrill Lynch said in a report.

Intel, the leading maker of the microprocessors that are the heart of personal computers, was also boosted by Salomon Brothers, who raised its rating for the stock to strong buy from hold. Intel has its European headquarters at Leixlip, Co Kildare.

International Business Machines jumped $4.50 to $157.625 and Compaq Computer climbed $2.125 to $74.50 in afternoon trading on the New York Stock Exchange. Microsoft rose $1.50 to $83.125.