This Week In The Markets

It may have been a truncated week of trading with not a jot of corporate news to drive the markets. But investors on both domestic and international stock exchanges show no sign of slowing the bull market with share prices rising steadily in the lead up to the new year and the single trading day of 1998.

In December, occidental stock markets showed signs of discounting the economic difficulties in the Far East with the late-December tribulations in Korea failing to have any significant impact.

Next Monday will see the first 1998 trading day when markets in Europe and North America trade against the background of reopened Far Eastern markets.

The Tokyo market has been closed for the past six days and there are differing opinions on the effect that the reopened oriental markets will have on this side of the world.

Overall, however, analysts in Dublin see little immediate reason to fear an end to the current record bull market, although few believe the Irish market will repeat the phenomenal growth of last year.

Mind you, it was this time last year that the analysts were forecasting an end-1997 ISEQ of 3,400, only to have to rejig their forecasts repeatedly during the year as the market took off.

Average forecasts for the end of 1998 are for an ISEQ of 4,800 - growth of around 20 per cent. Bar unforeseen problems - probably in the shape of an unexpected rise in US rates and a total meltdown in the Far East - those forecasts seem achievable and may be a trifle conservative.

Irish stock valuations are still lower than international markets - partly reflecting the occasional liquidity difficulties that affect the market - and should move closer to the international average during the year.

Technical factors in the form of huge institutional cash-flow, boosted by money from the Woodchester, New Ireland and Lyons sales, will add to the weight of money driving the market ahead.

Apart from the reopening of the Tokyo markets next week, investors will be playing close attention to other international events - particularly the two-day meeting of the Bank of England monetary policy committee beginning on Wednesday.

So far, the series of interest rate rises has failed to cap the consumer boom in Britain - evidenced by the bumper new-year sales figures - while the London stock market closed yesterday near its all-time high.

Many observers expect another quarter-point rate rise to emerge from this week's meeting of the monetary policy committee, despite governor, Mr Eddie George's recent comments about the British economy slowing down in 1998.

On the domestic front, Exchequer returns on Monday are unlikely to have any great impact on bond markets as most of the endyear figures have already been forecast in the December Budget.

Likewise, the November banking figures are unlikely to have much impact with the figures likely to show the credit boom continuing - a boom that has still not fed through to higher inflation other than in house prices.