Market reacts positively to recovery plan

STOCKS reacted positively to the details in the Government’s four-year plan yesterday with shares closing in positive territory last night.

Although AIB closed up 1.5% at 34 cent, Bank of Ireland finished the day down 11% at 27 cent and Irish Life and Permanent was down almost 16% at 63c. Overall, Irish shares closed up 0.5%.

Unlike the Budget, which is released at 4pm, markets had some time to react to the plan which was released at 2pm yesterday.

Also yesterday, Ireland’s debt rating was lowered two steps by Standard & Poors.

“The Irish government looks set to borrow over and above our previous projections to fund further bank capital injections into Ireland’s troubled banking system,” S&P said.

It also said putting the rating on review for downgrade reflects the risk that talks on an EU-led rescue may fail to stanch capital flight.

Meanwhile, independent market analyst Paul Sommerville said the markets “do not care” about Ireland’s four-year plan and have already moved on. He also warned that the taxpayer cannot sustain the bank debt. He said the markets would not even be concerned at the ins and outs of the plan as they had already factored in the leaked budget predictions and made their minds up about Ireland’s risk factor.

“The only thing the markets are interested in is when Brian Cowen will fall and what the deal with the IMF will bring.”

Mr Sommerville said the Euro had fallen again yesterday, bond yields for Spain, Portugal had all gone up and that the crisis had now moved up a gear.

Mr Sommerville said “our only hope here is to negotiate. We have the upper hand at the moment by our threat to default. We don’t have money for the banks.”