World banks rally - Cautious optimism

THOUGH it’s far, far too soon to suggest that the crisis in the world’s markets is slowing, there were two pieces of good news yesterday.

Though they are not significant enough to cause anyone to break out the champagne they represent a degree of reassurance that has been missing for the last few weeks.

Banking shares led a dramatic rally from Asia to Europe after governments took decisive action in a bid to stop further banking collapses.

In Britain, the FTSE 100 recorded the greatest surge in its history, helped by a ban on the short-selling of banking shares. On Wall Street the Dow jumped 4% in the first trades after a 400-point rally for blue chips. Government intervention by China and Russia saw their markets join the rally. This was mirrored in Europe, where Switzerland’s Credit Suisse rose 13%. In Germany, Deutsche Bank climbed 14%.

On the domestic front Finance Minister Brain Lenihan moved to restore calm by insisting that Irish deposits are secure. “The banks are well funded, they have the backing of the European Central Bank. There is no question of any danger to Irish deposits,” he said.

Shares in the main Irish banks reflected this turn of events. They soared yesterday morning with the value of merger-hungry Anglo Irish Bank up 120% at one stage. Bank of Ireland stock was up by nearly a third in early trading. These figures may afford an opportunity for some cautious, restrained optimism.