AFTER all the worries of the previous couple of weeks, equity markets have taken on a much firmer tone over the past week, with investors apparently now adopting the view that American interest rates are not going to rise at least for the next few months.
This week was seen as a crucial period for the markets - as it included a whole clutch of key economic figures in the US, figures which would give an indication on how the Federal Reserve chairman, Mr Alan Greenspan, might jump when it comes to increasing the Fed's own interest rates.
As things turned out, the markets took all of the figures in their stride, and American interest rates now seem likely to stand still at least until next September.
Even the announcement of a 4.2 per cent growth in the American economy in the second quarter had no impact, even though financial markets normally expect the Fed to raise interest rates to combat what, on the surface, seemed like an inflationary figure.
But those second quarter figures coincided with the latest report from the Chicago based National Association of Purchasing Managers, whose latest NAPM index figures showed a sharp slowdown in the US manufacturing sector. Those figures sent conflicting signals to the markets, but investors on this occasion decided that the NAPM figure - a forward looking statistic - is more important than historic economic growth figures.
The end result was that bond markets rallied and equity markets moved steadily upwards, a movement that was reinforced by yesterday's increase in US unemployment figures.
The slowdown in the manufacturing industry is a reassuring a sign for the Fed and all the indications are that Mr Greenspan, will wait until the September meeting of his Open Markets Committee before deciding on, where US interest rates will go.
On the domestic front, there was positive news from AIB, whose half year results were good, enough to have analysts sharpening their pencils to upgrade their full year forecasts.
The market had been expecting good numbers from AIB - especially after good half year figures from Natwest subsidiary Ulster Bank - but Thursday's results came in well ahead of expectations.
Earnings forecasts for the full year have now been pushed up from around 36p to 37 1/2-38p.
The Dublin market also got a boost when Davy's decided to leave its end year forecast for the ISEQ intact at 2700, despite the recent Wall Street inspired weakness which resulted in the Irish index moving 7 per cent off its mid June high.
At yesterday's closing levels, it will require the Irish market to grow by another 9 per cent in the second half if that Davy's forecast is to be achieved.
Davy's also took the view that the sell off of CRH has gone far enough, especially as the recent weakness in the share meant that CRH underperformed in the UK building materials sector and was on a substantial p/e discount to that sector. The share has still to revitalise despite its apparent cheapness but, at 585p, there seems little downside.
