Irish market reacts favourably to sale but warnings of ‘dark clouds’ ahead

IRELAND’S stock market reacted favourably to the bond sale with shares closing up 0.6% but Italy’s finance minister said dark clouds are gathering.

However, the head of the European Financial Stability Facility Klaus Regling provided a glimmer of hope saying he does not think Ireland or Portugal will ask for help.

“I do not think the worst will happen and that we will have to borrow to help Dublin and Lisbon,” Mr Regling told the German paper Handelsblatt.

Meanwhile Italian finance minister Giulio Tremonti said Europe’s economic outlook is unclear because of financial troubles at Irish banks and the growing number of “derivatives” in financial markets.

In an interview with weekly magazine Oggi he said: “Dark clouds are gathering over the Atlantic right now, and they could hit Irish banks first.”

“In Italy, we’ve done what we had to do, but what happens in Europe doesn’t depend only on us. While the worst of the economic crisis appears to have passed, “the masters of speculative finance are still on the loose,” he said.

“The mass of speculative derivatives is growing again. We’re still in ‘terra incognita’ and nothing can be ruled out.”

On the markets AIB and Bank of Ireland both closed up but Irish Life and Permanent closed down 3.17% to €1.56.

AIB was up 3.2% to 63 cent while Bank of Ireland was up 0.15% to 65 cent.

Across Europe stocks fell, as sell-offs in Nokia and Deutsche Bank overshadowed debt sales by Ireland, Spain and Greece and investors awaited the latest policy statement from the US Federal Reserve.

Ireland sold €1.5 billion of bonds yesterday, a day after its borrowing costs reached a record high and central bank Governor Patrick Honohan said the Government needs to cut its budget deficit at a faster pace.

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