Market rally to add another 10%

THE bull market which has pushed stocks up 25% this year is set to continue, with analysts forecasting further growth of up to 10% in the near term.

Irish shares gave up a third of their gains so far this week, falling for the first day in five as investors took profits on an ISEQ surge which had increased the index value by €1.5 billion.

A 0.8% fall in the value of shares knocked €500 million off shares traded on the Irish Stock Exchange.

The ISEQ shed 36.03 points, after rising to its highest level since December 2 on Monday.

NCB Stockbrokers’ head of international equities Paul Deeney is bullish about the near term.

“The rally could continue in the near term, to add 10% to market values,” he said.

Mr Deeney said the US Federal Reserve is expected to cut interest rates by another 0.25%, and he believes this will stimulate growth and attract money which is currently in cash and bonds back into equities.

“Fund managers going back into equities have pushed the market ahead 25% this year, and with a lot of managers still underweight in equities there is still a lot of money to come in,” he predicted.

He also said the European telecoms sector looks particularly attractive, especially as it is sheltered from the weakness in the dollar.

Shares of financials dropped in the US after Morgan Stanley and Bear Stearns reported profits down on the previous year.

Brandywine Asset Management head trader Donna Van Vlack oversees $8 billion in the Delaware company.

“You are starting to get a bit of a reality check,” she said.

Ms Van Vlack believes the market has climbed “too far, too fast for what companies are saying.”

The rally that has lifted the Standard & Poor’s 500 Index by 26% over the past three months pared the ranks of bears among financial newsletter writers to a new 16-year low last week, a survey by Investors Intelligence found.

In Europe, stocks rose for a third day, paced by Sanofi-Synthelabo SA, France’s second-biggest drugmaker, BP Plc and Deutsche Telekom AG, as some investors sought companies likely to post profits even as the economy stagnates.

The Dow Jones Stoxx 50 Index and the Stoxx 600 Index have risen about 30% since March 12, when they reached their lowest levels in more than six years.

Benchmark indexes rose in 12 of the 17 western European markets. France’s CAC 40 Index added 0.2%, Germany’s DAX gained 0.4% and Britain’s FTSE 100 saw an increase of 0.3%.

Additional reporting by Bloomberg