Irish shares surged after Boris Johnson secured a resounding election victory in the UK, as banks, property, travel firms, and hoteliers tapped into the sharp climb in the value of sterling.
Sterling climbed towards 83p against the euro at one stage as the scale of the election victory bolstered investors’ appetite for UK and Irish assets.
They have been under the Brexit cloud since the summer 2016 referendum. Irish shares rallied as the election victory opened up the way to MPs next month approving the withdrawal/transition deal Mr Johnson had struck with the EU.
Bank of Ireland, which generates a significant chunk of its earnings from its British joint ventures, surged at one stage but pared gains to close 1.5% higher.
AIB rose by over 2% and the Irish stockmarket-listed house builders, Cairn Homes and Glenveagh Properties gained 3.5% and 2.5%.
Other shares that have long been under the shadow of Brexit and the weak value of sterling also climbed: Ryanair shares rose 3.5% and Irish Ferries-owner ICG climbed 5.5%.
Building products maker Kingspan also rose strongly, by 4.7%.
Shares in fuel and food retailer, Applegreen, which operates a large number of forecourts in Britain, rose 4.5%.
Irish, UK, and global stock markets were also boosted as US president Donald Trump and China announced a partial breakthrough in their trade spat.
But the Brexit risk to the Irish and British economies still looms, if Mr Johnson insists on sticking to his goal of securing a free trade agreement with the EU by the end of 2020, analysts warned.
“The optimists out there believe that Johnson could use his substantial majority to ensure the UK leaves with a good deal rather than a quick deal,” Joshua Mahony at online broker IG said.
“However, the outlook for Brexit trade negotiations remain unclear, with clarity likely to provide direction for the pound going forward,” he said.
John O’Loughlin, partner for global trade and customs, at PwC in Ireland said the passing of the withdrawal agreement in January would mean there would be “an unprecedented” short period of 11 months for the UK and EU to conclude a free trade agreement.
Mr Johnson has said he won’t seek an extension to the talks by the last possible date of June 30, potentially setting up a return of six months of uncertainty as companies face another year-end cliff edge, said Mr O’Loughlin.
And he warned that a free trade agreement won’t be boon for many Irish firms, in particular for businesses sourcing supplies from Asia.
On the prospects for sterling, Capital Economics in London said the currency could still gain further.
“We forecast that sterling will strengthen further, but that it will not surpass its levels before the referendum against either the US dollar or the euro anytime soon.”
State Street Global Advisors said the talks over a free trade agreement will determine sterling’s path next year.
“The Conservative victory reduces the odds of a messy rupture in the UK’s trading regime by year-end 2020, with an extension of the transition period seeming most likely,” said the bank.
“While it will not be the rollercoaster of the divorce negotiations, political signals about the UK-EU trade talks will continue to drive sterling volatility over the course of 2020.”