Markets gain in Dublin, London

MARKETS in Dublin and London yesterday made substantial gains despite fears of a further slide following slight losses on Wednesday.

By close of business yesterday, the FTSE 100 gained £23 billion as shares rallied, boosting the index by 2.7%.

In Dublin, the ISEQ gained 1.8bn boosted by the London rally.

On the money markets, the US dollar recovered almost 1 cent against the euro to close at $1.0780 against $1.09 two days ago. Sterling also rallied against the euro to close at £0.65.30, down from £0.66.40 on Wednesday.

In Dublin, shares on the ISEQ 100 followed London's lead, boosted by news that Elan has reached its 1.5 billion asset disposal target, set after the disasters it has suffered since it was forced to restate its accounts.

As a result, Elan's share price shot up by over 20% on the day to close at 4.63. Though still a long way off its highs, the recovery was faster and more solid than many sceptics thought possible a few months ago.

Also, in Dublin, financial stocks enjoyed good support, boosted by some pick-up in British financials as the FTSE continued to dust itself off after the recent bad 11-day run of continuing declines. AIB was up 40 cent on the day to 12.75, while Bank of Ireland rose 3.94% or 36 cent to close out the day at 9.49. Galen also enjoyed a good run. It was up 40c, boosted to some extent by the more optimistic noises coming out of Elan.

Ulster Bank Financial Markets chief economist Niall Dunne thinks the dollar recovery yesterday was on the optimistic side. It coincided with GDP growth in the last quarter of just 0.1%. The markets had been anticipating a rise of up to 0.3% and the figures suggest that the US could even go into recession in quarter one of 2003, he said.

Under normal circumstances, Mr Dunne said he believes the US figures would have undermined the markets and the currency.

But he said the dollar's modest rally has to be seen against the backdrop of support by seven European countries for the US and Britain's threatened war against Iraq.

Mr Dunne said if the war question was resolved, markets would see that the US is heading for growth of just 2.5% in 2003. But US President George W. Bush and his advisers think growth ought to be 4%.

"That idea of 4% trend growth is wrong and they should not be trying to force the issue," said Mr Dunne.

When the dust settles on the war, expect to see the euro rally against the dollar and head back to around the $1.09/1.10 mark, he said.