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Domestic industries lead post-Budget stocks higher

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Spending: Paschal Donohoe and Michael McGrath arrive at the Convention Centre ahead of the Budget

Spending: Paschal Donohoe and Michael McGrath arrive at the Convention Centre ahead of the Budget

Spending: Paschal Donohoe and Michael McGrath arrive at the Convention Centre ahead of the Budget

Domestically focused firms including banks and builders saw their shares rally on the back of this week's expansionary Budget, led by recruitment group CPL.

Shares in CPL Resources rose by more than 6pc to €7.85 in Dublin yesterday as investors bet on the €10.1bn in capital spending in the Budget from health to infrastructure, which will require recruiting thousands of workers to deliver at the scale envisaged.

Beaten up bank stocks also posted modest gains with Bank of Ireland rising just over 3pc and AIB going up by just under 2pc. Permanent TSB, often the straggler of the sector, was essentially flat at €0.48 a share.

The bump in banks shares owed much to the business-friendly supports contained in Tuesday's budget, with a range of liquidity measures either being extended and enhanced. Those schemes to help small businesses are positive for bank credit trends, where a significant proportion of troubled loans are in the SME sector, analysts said.

"The additional SME support may keep firms open for longer, and whilst it is probably debatable in the context of helping lending activity levels, the most direct impact will probably be seen in providing ongoing supports to keep as many firms as possible out of default plus also keeping their staff employed," wrote Eamonn Hughes, banking analyst with Goodbody, in a note to investors.

Analysts also pointed to the announcement of a shared equity scheme for first time buyers as positive for banks, as it would increase activity in the mortgage market by unlocking access to housing for a segment of buyers who are currently locked out by price.

Although residential property price figures released yesterday by the Central Statistics Office show house prices down by a slight 0.6pc year on year, strict Central Bank lending limits have restricted the growth of the mortgage market.

Irish housebuilders also bounced strongly in response to the free-spending budget, with Cairn Homes and Glenveagh both ending the day with gains. Cairn was up just under 2.5pc while Glenveagh surged 4.5pc in response to government moves to tackle the housing crisis.

"The new measures announced should provide first-time buyers with an excellent opportunity to become homeowners, and the confidence that they will breathe into the industry has the potential to drive a significant supply response from the home builders," said Davy analyst Colin Sheridan. "The industry outlook has improved considerably."

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