Stock markets are notoriously fickle and never more so than when they are dealing with cyclical and deal-driven stocks like Smurfit. It isn't that many months since Smurfit was being disparaged and the management dismissed as being incapable of doing the really big deal that would restore the group's fortunes.

That erosion of interest was fully reflected in the slump in the share price, and Smurfit's fall in the Irish rankings from market kingpin to number five. Now with the JS Corp/ Stone merger, Smurfit's reputation has been restored and even the London market which has always tended to react indifferently to Smurfit registered its approval for the JS Corp/Stone deal.

Rationalisation has been the buzzword in the US packaging industry for years, but until JS Corp and Stone announced their engagement there was no sign of the industry getting to grips with the fact that too many companies with too many facilities were chasing too little business.

The sort of savings that are anticipated from the merged company, to be known as Smurfit Stone Container Corporation (SSCC), and the concentration of resources on a smaller number of more productive plants will put intense pressure on SSCC's competitors to respond quickly.

However, Before anybody gets carried away with the market euphoria surrounding the SSCC merger, they should be aware that dangers still lurk.

First, the merger means that Smurfit through its 34 per cent of SSCC will be even more exposed to the notorious cyclicality of the packaging industry. Against that, the sort of annual savings that the merger will bring a minimum of $350 million (£248 million) as well as the lower debt burden from the sale of assets, should mean that SSCC will be able to ride the peaks and troughs of the cycle more efficiently than its competitors.

For Smurfit itself, the deal opens up opportunities in Europe where SSCC is likely to sell some or possibly all of its packaging operations. After buying half of Morgan Stanley's stake in JS Corp and selling the Fernandina Beach to SSCC, Smurfit has a gearing of about 50 per cent and could easily afford to spend £1 billion buying European assets.

Smurfit shares have come back since the initial euphoria after the SSCC merger announcement, and in the short-term are unlikely to press much beyond 300p.