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End of the bust as shares hit a five year high  

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STOCK markets in Ireland and around the world have hit a fiveyear high, amid signs that the global economy is finally recovering from the greatest financial collapse in 80 years.

At home, the Dublin stock market is at its highest level since September 2008, just before the infamous bank guarantee that followed the crash in the global economy.

Globally, shares in many companies that came through the crash intact are now trading at levels last seen before the collapse of Lehman Brothers five years ago.

“The global outlook is the strongest it has been in five years and now looks more sustainable,” said Dublin-based Investec economist Phillip O’Sullivan.

The resurgence in the international economy, allied to the news that Ireland would leave

the bailout in less than two months, had brought investors to Ireland who were looking to benefit as the economy recovers, he said.

Stock markets have been rising here and in most other parts of the Western world for several months, in a signal that investors believe the wider economy is about to improve.

Those gains usually come ahead of any general pick-up.

Low interest rates and cheap money also mean that many investors have moved out of safe saving products, such as bonds and deposit accounts, to buy shares.

Anybody buying a basket of Irish shares at the beginning of the year would be 25pc richer today, while those who kept their money in a standard bank account that is subject to DIRT tax would have seen hardly any increase at all, investment experts say.

Big global players, like CRH, Kerry Group and Paddy Power, are all trading at close to five-year

highs. Companies that are highly focused on the Irish economy have also performed strongly this year.

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Shares in Bank of Ireland are up 130pc since the start of this year, the best performance for any European bank, Mr O’Sullivan said.

It comes as global stocks hit the latest high yesterday on expectations that the US Federal Reserve will keep its stimulus in place for longer than had originally been thought because of the fallout from the country’s government debt crisis.

A stronger-than-expected recovery in the UK has stunned many investors, while the eurozone is finally limping back to growth.

Crucially, with China and Japan both back on track, all of the world’s biggest economies are now growing at the same time for the first time since before the global economic meltdown.

“Hopefully, the lessons of the past few years have been learned and it will now be a more sustainable recovery,” Mr O’Sullivan added.

Change

Mortgage-holders also appear to be on track for a long period of record-low interest rates after one of the most conservative central bankers in Europe said there was no need for a change.

The move will be a massive boost to tracker mortgage-holders, who have saved around €6,000 on home-loan costs due to a succession of European Central Bank rate reductions.

Austrian central banker Ewald Nowotny said the ECB did not need to raise interest rates, according to a member of the bank’s governing council, Ewald Nowotny.

Mr Nowotny said a unilateral decision by the ECB to raise rates could create deflationary pressures in the eurozone.

Economists said that his comments meant it would be well into 2015 before eurozone interest rates rose.

- Donal O’Donovan and Charlie Weston


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