Relief as potential deal eases investor fears
Published 18/11/2010 | 05:00
IGNORING the bluster coming from Taoiseach Brian Cowen, the markets showed signs of relief as the country prepared to begin talks with the European Commission, European Central Bank and International Monetary Fund on some kind of bailout mechanism that could be used to stabilise the country's banks.
Stocks rebounded, the euro rose and Irish bonds gained as officials began arriving in Dublin to scan the books of the country's banks.
"It's a bit of a relief bounce," said Quincy Krosby, chief market strategist for New Jersey-based Prudential Financial.
"Investors are realising that there will be a solution for the Irish situation that won't end up in global contagion."
Charles Diebel, head of market strategy at Lloyds TSB Corporate Bank in London, said: "It seems pretty inevitable that some kind of deal will be done. It's just a question of how and what the details are."
The Europe Stoxx 600 Index of shares gained 0.5pc yesterday after tumbling 2.3pc the previous day amid uncertainty about what was happening in Ireland as well as concerns about China.
In Dublin, the ISEQ added 1.5pc, which helped to erase a 1.7pc drop on Tuesday. The euro climbed 0.5pc to $1.35 after falling 1.5pc over the previous two days.
Most of the movements on the Dublin stock exchange were sparked by company news after a string of announcements from the likes of United Drug, Greencore and Irish Life & Permanent.
The banks, pushed to the brink by the financial crisis and a property collapse, came under further downward pressure, with shares in Allied Irish falling again.
The bank, which will be more than 90pc owned by the State following a rights issue later this year, will issue a trading statement this week. Bank of Ireland added a cent.
'The Wall Street Journal' reported that the "dysfunctional family drama playing out between Dublin and Brussels" has attracted US hedge fund managers starved for intriguing plays in their own country.
Bargain hunters are eyeing Irish bank debt, in particular Allied Irish Banks and Bank of Ireland, the newspaper reported.
The hedge fund managers are focusing on the future treatment of about $9bn (€6.6bn) in junior bonds issued by the banks that will be among the last to get paid off in any restructuring.