Thursday 17 October 2019

Irish shares surge as investors bet on Brexit breakthrough

Banks and housebuilders drive the Iseq higher amid growing hopes that the UK can avoid no-deal departure from the EU

Traders work on the floor at the New York Stock Exchange (NYSE) in New York
Traders work on the floor at the New York Stock Exchange (NYSE) in New York
Donal O'Donovan

Donal O'Donovan

Irish shares and Government bonds swung dramatically higher yesterday, lifted by a surge in optimism that a Brexit deal will be done.

AIB and Bank of Ireland shares were each more than 10pc higher at one stage.

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Stock market housebuilders Cairn and Glenveagh and a host of industrial stocks all clocked up significant gains too - boosting the Iseq a massive 3.46pc and making it the best performer among European shares.

In the UK, the same momentum carried British bank shares to even greater heights - Royal Bank of Scotland rose as much as 16.4pc, its biggest intraday jump since May 2010.

Shares in Lloyds Banking Group were also 12.5pc higher.

The pound also surged to a three-month high yesterday, as the prospect of a crash-out Brexit on October 31 was seen to lessen.

The British pound's rise since Thursday is the biggest two-day gain since the Brexit vote in 2016.

Irish bank shares have surged on the prospect of a softer Brexit, along with the swings higher for sterling and Irish Government debt.

The pound was up by 1.4pc against the euro yesterday, to 87.20 pence, as the prospects of a potential Brexit deal improved.

Markets were boosted on renewed hopes of an agreed Brexit following discussions on Thursday between Taoiseach Leo Varadkar and the British prime minister Boris Johnson.

Davy Stockbrokers' chief economist Conall MacCoille said the scale of the market moves seen yesterday occurred in part because some investors had been caught on the wrong side of the Brexit trade.

"The market has whipped back because valuations for some Irish equity names were pricing in a very hard no-deal Brexit," he said.

Traders in some cases had to scramble to unwind those positions, and therefore they pushed markets even more dramatically to adjust.

"There are a lot of hoops to jump through but markets are looking at this and seeing the chances of a no-deal as extremely low," he added.

The positive sentiment seen after Thursday's UK-Irish meeting was boosted in Brussels yesterday when the EU Brexit negotiator Michel Barnier said he had had a "constructive" meeting with his British counterpart, Stephen Barclay, following the Varadkar/Johnson talks.

On the bond market, Irish Government bonds also led European gains.

They had lagged peers as the risk of a Brexit crisis intensified but yesterday they narrowed the gap - or spread - over German bonds.

Irish Independent

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