French poll ‘relief rally’ aids AIB sale

The “relief rally” by markets on the outcome of the first round of the French presidential elections makes it likely that the Government will get its planned sale of AIB shares away by early summer, a leading analyst has said.

Along with other European stocks and some eurozone debt markets, Irish bank shares and the yields on Irish bonds fell as money poured back into European assets, as investors assessed that far-right, anti-EU candidate Marine Le Pen will not have enough support to win the final round of the French election on May 7.

The Iseq Overall index of Irish shares climbed more than 200 points, or almost 3%. Shares in Bank of Ireland rose to almost 26 cent, and Permanent TSB traded at 245 cent at one stage.

The “relief rally”, which boosted European banks, has improved the prospects for the near-term sale of a 25% stake in AIB, said David Donnelly, head of research at Cantor Fitzgerald Ireland.

Finance Minister Michael Noonan reiterated that a shares offer could take place in May or June, but also mentioned the start of July as a possible window for the sale.

Analysts last week had said a favourable reaction by markets to the French election would help boost the value of shares in any upcoming sale of AIB.

Britain’s Ftse 100 index also jumped as banking stocks surged after Emmanuel Macron came out on top in the first round of France’s election.

Mr Macron, the French centrist candidate, won the first round of voting, qualifying for a May 7 run-off alongside Ms Le Pen.

This quelled market worries about a potential anti-establishment shock in light of the UK’s Brexit vote last June and Donald’s Trump’s election in the US.

“There’s the upside, and that’s a pro-European stance which Macron has campaigned on and that’s going to be something that also cheers the markets,” said Dean Turner, an economist at UBS Wealth Management.

“It delivers some potential upside in terms of what it could mean for Europe going forward.”

UK banks jumped 2.4%, joining in with a broader risk-on rally among European lenders, which surged 4%. Shares in Barclays rose nearly 5%, while Standard Chartered was up 3.4% and Ulster Bank-owner RBS gained 2.8%.

“It’s the pro-growth backdrop that we’re now starting to see come through rather than ongoing austerity, which is providing quite a significant shift with the outlook for the European banks, in particular with the French banks very much leading the way,” Dafydd Davies, a partner at Charles Hanover Investments, said.

Additional reporting: Reuters