Stocks make recovery but bank shares still take a pummelling
Four-year plan eases some concerns but S&P says growth forecasts too optimistic
Published 25/11/2010 | 05:00
IRISH shares recovered slightly yesterday as the Government's four year plan seemed to ease the market despite the continued selling of bank stocks which enveloped the market for much of the day.
By the end of trading the index was up slightly at 2678.12 for a gain of 0.53pc or 14.22 points.
Ratings agency Standard & Poor's cut Ireland's long-term sovereign rating and warned of further cuts to come while the Government's four-year plan was deemed to be tougher than had been first thought.
Unsurprisingly, the financials all suffered heavy losses amid reports the Government would take a bigger-than-expected stake in Allied Irish Banks and a majority stake in Bank of Ireland.
By the close, Bank of Ireland had slumped again to 26c a loss of 12.67pc, Irish Life & Permanent crashed 14.65pc to 65c and AIB was down 3.03pc at 32c.
AIB and IL&P have seen their value nearly halved in three days as relentless selling continues.
"The main thing from the markets' perspective will be the economic growth assumptions for the next four years. If the feeling is that GDP forecasts are overly optimistic, then more upward pressure is likely to come on government bond yields," said analysts at Bloxham Stockbrokers.
Away from the banks, it was actually a decent day for most of the ISEQ, with many stocks finishing the day higher.
It was a good day for commodity stocks, with oil and gas explorers Providence Resources surging 6.96pc to €3.48 and Dragon Oil rising 2.25pc to €5.22. The mining group Kenmare Resources jumped 5pc, regaining some of the losses it sustained last week after a €10m libel ruling against the company.
Ireland was the only country in Western Europe to post a loss on the day, as indexes across the continent took a breath after the frenzy of the last few days and fears of a potential war in East Asia eased. The UK's FTSE 100 rose 1.45pc, France's CAC 40 increased 0.7pc and Germany's DAX index surged 1.8pc. The composite Stoxx 600 Index rose 0.8pc.
"What's going on regarding the peripheral European countries is impacting sentiment, but that is presenting valuation opportunities," said Kevin Lilley, of Royal London Asset Management. "There is still substantial upside to equity markets."
In Frankfurt, luxury car maker Porsche added 4.6pc after operating profit surged more than sevenfold in the fiscal first quarter on demand for the Cayenne sport-utility vehicle and the Panamera sedan.
In London, Compass Group, the world's biggest contract caterer, rose 5.6pc after it reported full-year results that beat analysts' expectations. The company, which counts the British armed forces among its clients, lifted its dividend by a third after posting an 18pc rise in annual pre-tax profit.