Thursday 21 September 2017

ISEQ at three-month high after Budget backing and bank gains

Finance Minister Brian Lenihan. Photo: Bloomberg News
Finance Minister Brian Lenihan. Photo: Bloomberg News
Thomas Molloy

Thomas Molloy

THE ISEQ closed above the 2,800 level for the first time in almost three months as the banks had another good day and Finance Minister Brian Lenihan won the backing of TDs in the first votes on his €6bn Budget. European shares hit two-year highs.

The benchmark ISEQ ended the day up 17.92 points, or 0.6pc, at 2817.89 points as Allied Irish Banks advanced 11.6pc to 50c and Bank of Ireland jumped 4.6pc to 44c on optimism they might be able to bolster capital cheaply. Bank of Ireland offered to swap subordinated bonds at a premium to the market rate as it seeks to bolster its capital. The bank said yesterday that it will exchange as much as €3bn worth of debt for around half that amount.

"It will come as some relief to investors that a coercive, more penal approach has not been adopted," Dublin-based bond specialists Glas Securities said.

DCC extended recent gains, rising 2pc to €21.51 on hopes that the present cold snap will boost demand for oil here and in the UK. Kerry was up 1.5pc at €24.63 after the company was rated new "buy" at Collins Stewart by equity analyst Alicia Forry. The 12-month target price is €32 per share.

European stocks extended a two-year high, as insurance companies rallied and takeover speculation boosted companies ranging from British shoulder and knee implant maker Smith & Nephew to Burberry and Fiat.

Prudential climbed 3.7pc as UBS recommended Britain's largest insurer and Standard & Poor's raised its outlook for the US life insurance industry. Smith & Nephew, Burberry and Fiat advanced more than 2pc. UK-based Capital Shopping Centres fell 5.3pc after Simon Property said it may end its interest in buying the company. Mining companies slid amid speculation China will raise interest rates.

The Stoxx Europe 600 Index gained 0.4 pc to close at 274.98 in London, the highest level since September 2008.

"We have seen a general willingness from investors to focus on the positive stories out there rather than concentrate on risk aversion," said Joshua Raymond, a market strategist at City Index in London. Traders are "clinging on to any M&A news".

The Stoxx 600 declined as much as 0.4pc yesterday morning after China's statistics bureau brought forward the release of its November economic data by two days to December 11, heightening speculation the People's Bank of China will raise interest rates this weekend.

National benchmark indexes climbed in 10 of 17 western European markets that were open. France's CAC 40 gained 0.6pc, while Germany's DAX fell 0.4pc and the UK's FTSE 100 dropped 0.2pc.

Zurich Financial Services rose 3pc and Swiss Re gained 2.2pc after executives from both firms told the Financial Stability Board that insurers don't carry the same systemic risks as banks and should not be classed as systemically important financial institutions, according to the 'Financial Times'.

That designation would mean insurers becoming subject to tighter scrutiny from regulators attempting to avoid another financial crisis.

Irish Independent

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