ISEQ revamp starts to impact on the market
THE rebalancing of the weightings which go to make up the ISEQ Index started to impact on the market this week, with institutions buying up tranches of stock in companies which have seen their weighting increase.
Fund managers in the tracker bond business and others who sell products which track the fortunes of the ISEQ were forced to rebalance their portfolios ahead of Monday, the day the new ISEQ weightings become effective.
This led to substantial buying of the likes of Ryanair, CRH, AIB and Bank of Ireland, all of which have seen their weightings rise by up to 10pc.
It was all good news for the index, with the ISEQ closing yesterday's session up 154.51 points at 9659.62 to bring a good week to a close.
The market had been in buoyant form anyway, with European and US stocks all on the rise yesterday.
Financial
In Dublin, the banks were in strong demand following a re-rating of the sector, brokers finally coming out in favour of the big two, both of which have seen their yields rise substantially in recent weeks.
A report from Goodbody Stockbrokers said Dublin bank shares are about 12pc undervalued compared to their European peers. Since that report, AIB has come in for solid buying, with the shares adding a further 28c to €21.60 yesterday.
Bank of Ireland was also on the up, climbing 27c to €16.20.
Construction
Fears of a slowdown in activity in the housing sector did nothing to dampen demand for market heavyweight CRH, which ended the week with a gain of 74c to €37, closing in on its all-time high once again.
The rest of the sector was buoyed, with Grafton showing a gain of 22c to €11.30 and housebuilders Abbey as well as McInerney also showing gains.
Only Kingspan, which has had its market weighting in the index reduced by 19pc, was sold, closing down 20c at €20.
Drugs
Analysts are once again backing Elan, with another favourable view coming from Merrion Stockbrokers, who reiterated their buy rating.
Merrion pointed out that within the next 6-12 months, Elan and partner Wyeth will finalise the logistics and responsibilities for the commercialization of its new drug, Bapineuzumab.
The broker also expect further progress in the group's R&D pipeline which could increase its profile in the neuroscience field.
London
Takeover speculation surrounding blue chip stocks helped drive the London market through the psychological 6700 barrier to close at its highest level for nearly seven years.
The FTSE-100 Index shrugged off last week's volatility, closing up 82.5 points at 6732.4.
The gains follow yesterday's 90.3-point surge and see the Footsie more than recover the 2pc shed last week amid global interest rate concerns and worries over China.
New York markets continued to lend support, with the Dow Jones Industrial Average adding another 71 points on Thursday last night following a strong rise on Wednesday and making further advances in trading yesterday.
Takeover speculation involving building supplies group Wolseley helped boost the market, up 5pc as traders cited consolidation rumours.
The Build Center and Plumb Center chain, which has sizeable interests in the United States, rose by as much as 8pc at one stage, before settling to close up 58p at 1328p.
Supermarket Sainsbury's also found itself in the takeover spotlight again, rallying 4pc after it emerged a Qatari-backed investment fund now owned a 25pc stake in the supermarket chain.
All the major listed supermarket chains were trading higher after the Delta Two fund bought shares in Sainsbury's at 595p - well above the price of 565p last night.
Europe
European shares rose sharply, helped by a tame reading on US core inflation that eased concerns over potential Federal Reserve rate increases and sent bond yields lower.
The FTSEurofirst 300 index of top European companies closed up 1.28pc at 1,625.87 points, taking its gain in the week to 3.7pc and wiping out its losses of the previous week, when rising bond yields seduced investors.
New York
US stocks climbed on reassuring inflation news and fresh optimism about the tech sector after an upgrade of bellwether Intel.
A 4.1pc jump in the shares of Intel Corp triggered an advance in technology stocks after Goldman Sachs raised its rating on the world's dominant chip maker, to "buy" from "neutral". A flurry of deal news also lent support, following a report that the New York Mercantile Exchange was exploring a sale. Shares of the NYMEX, the world's largest energy market, rose 2.9pc.
Wall Street got some good news about the outlook for the US economy and interest rates before the opening bell, when government data showed the core US Consumer Price Index, which excludes food and energy, rose only 0.1pc in May, below Wall Street's median forecast for a gain of 0.2pc.
The tame inflation reading reinforced the view that the Federal Reserve, which meets June 27-28, is likely to hold interest rates steady.
Dollar
The dollar fell against the euro as data suggested inflation may be easing, but reached yet another four-and-a-half-year high against the yen after the Bank of Japan indicated it was in no hurry to raise interest rates.
It was the third straight day for the dollar to climb to such a high against the yen.
The euro rose 0.3pc to $1.3345 after a government report showed the core Consumer Price Index, which excludes food and energy costs, posted its smallest increase in May since March 2006.
PAT BOYLE
