Revaluation of the pound sends stocks to new highs

The Irish stock market climbed to record highs as a delayed reaction to the weekend revaluation of the pound boosted many of the leading shares, particularly in the financial sector.

The market added more than ú700 million in value as the ISEQ index breached the 5,200 level.

But it slipped back slightly to close at 5,197.00, a gain of 1.55 per cent on the day. The Irish market has now gained some 28 per cent since the start of the year.

The Government's decision at the weekend to revalue the pound's central rate in the European Exchange Rate Mechanism (ERM) is expected to result in lower interest rates which should boost economic activity.

The Central Bank is expected to clear the way for interest rate cuts in the next couple of weeks, allowing rates to fall toward the levels likely to prevail in European Economic and Monetary Union (EMU).

"The market was not wholly active on Monday because of the prospect of a holiday on Tuesday. But the revaluation has been seen as positive and we are seeing reaction to that today," one trader said.

Stocks with exposure to the Irish economy should benefit, particularly financial stocks, and these were strong gainers yesterday.

Bank of Ireland and Irish Life surged to record levels while AIB, Hibernian and Anglo Irish Bank also made progress.

CRH was another star performer, closing at a record high of ú10.86 on optimism about the positive outlook for Irish economic activity.

A weak start on Wall Street failed to dent Irish shares although it took some of the sheen off European markets, which retreated from their recent peaks as Wall Street slid.

Fresh profit warnings from several technology companies, telecommunications hearings in the Senate and an upcoming speech from Federal Reserve chairman, Mr Alan Greenspan added to the mood of caution in New York.

But Britain's blue-chip FTSE 100 index also managed to buck the trend and set a fresh record as fears of rising interest rates following Tuesday's British budget were quashed by weak economic data.

British Chancellor of the Exchequer, Mr Gordon Brown's failure to raise taxes in the budget triggered fears that British interest rates would have to be raised instead to help ward off inflation.