Markets rise but euro still struggling

Financial shares led the ISEQ index of Irish shares higher yesterday, as the market continued its strong start to the new quarter. As European stock markets in general gained, the ISEQ index of Irish shares rose 1.7 per cent to climb back above the 5,000 level, with the two main bank stocks rising strongly. Bank of Ireland closed at €17.15 (£13.51), a gain of 60 cents on the day, while AIB added nine cents to close at €13.55 (£10.67). Irish Life & Permanent gained 42 cents to end at €10.77 (£8.48).

The rise followed a 2.2 per cent increase in the ISEQ index on Thursday, providing a strong backdrop for next week's Telecom flotation.

European stocks moved higher along with Wall Street yesterday after a mixed US jobs report eased immediate concerns that US interest rates would have to be tightened soon to cool a buoyant US economy.

Meanwhile, the euro has remained weak against the US dollar, closing yesterday at $1.0240 with no short-term recovery in prospect.

The jobs data and the Dow's reaction did little to offset the euro's weakness against a broadly firmer dollar which earlier set a 23-month peak of $1.5699 against the pound and climbed to an eight-year high of $1.5723 against the Swiss franc.

US stocks made a tentative start, with the Dow Industrials average see-sawing around opening levels before moving higher. Just after London share trading closed the Dow was up 45.91 points, or 0.4 percent, at 11,112.33. It closed last night at a record 11,139.24, up 72.82. The Nasdaq also hit new heights, closing at 2,740.94.

But trade on Wall Street was subdued with US markets winding down for the July 4th long weekend.

The US Labor Department said the number of workers on payrolls rose by 268,000 last month after a drop of 5,000 in May and against a forecast of a 220,000 increase.

Worker pay also grew strongly but the figures were softened by a rise in the unemployment rate to 4.3 per cent from 4.2 per cent the month before.

The report, which painted a picture of a solidly growing economy, with particular strength in the vast service sector, came just two days after the Federal Reserve raised a key short-term interest rate by a quarter-percentage point.

"We have a mixed bag here, with the rate of unemployment kicking up; that's excellent," said Mr Phil Orlando, chief investment officer at Value Line Asset Management. "Wage inflation went up . . . I'm not so happy about that."

Pan-European stock indices tracked Wall Street higher with the EuroSTOXX 50 index of eurozone blue chips up around 0.53 per cent.

German shares also took heart from the firmer Dow, with the DAX index rising 0.7 per cent to 5,519.05, up 38.83 points from Thursday's close and a new high for 1999.

Wall Street also helped Paris's CAC-40 index to edge up 0.25 per cent to a new closing high at 4,620.67, making a total gain for the week of 4.6 per cent after five straight days of gains.

Britain's FTSE 100 - which on Thursday scored its biggest one-day rise for almost six months - ended flat having been down 30 points or so earlier.

The dollar barely budged after the US data and remained just below Thursday's life high against the euro of $1.0201 though it later eased back to around $1.0240 in late European trading.