The so-called "old economy" financial and industrial shares in Europe have staged a dramatic recovery on world markets as the Dow Jones index of leading US stocks soared almost 5 per cent last night. The technology-laden Nasdaq index also recovered some ground, climbing close to 3 per cent after shedding almost 10 per cent of its value in less than four sessions.
The main Irish beneficiaries yesterday were the three large banking stocks - AIB, Bank of Ireland and Irish Life & Permanent - all of which were sharply higher. The ISEQ Financial Index was almost 6 per cent higher while the Overall Index was up 3.5 per cent, with more than €2.5 billion (£2 billion) being restored to the value of the market.
The main losers in Dublin were technology shares such as Iona, Trintech, Baltimore and the recently floated Riverdeep, all of which were sharply lower.
Stocks showed little reaction to the quarter-point interest rate rise from the European Central Bank and instead were boosted by the continued improvement of the New York market, where the Dow Jones Index of the 30 biggest shares rose strongly from the opening bell. An early rally by the Nasdaq market fizzled out before launching a turnaround as the session's end approached. The Dow closed up 499.12 on 10,630.6 while the main Nasdaq index reversed its big losses of the past few days with a 134.66 rise to 4,717.28. Before the Nasdaq's late rally, yesterday's activity was a repeat of Wednesday when investors worldwide piled into the so-called "value" stocks in the financial and industrial sectors and out of the high-priced telecoms, media and technology sectors that have been the focus of investor interest so far this year, at least until the Nasdaq began to slip earlier this week.
Dealers believe the shift in sentiment in New York - followed by other major international markets - represents a clear correction from the situation where financial and industrial stocks had been oversold and the technology shares overbought.
Interest in the "old industry" shares was boosted by producer prices data in the US which showed that the "goldilocks" US economy was still motoring along nicely without any real sign of inflationary pressures that might tempt the Federal Reserve to raise US interest rates.
Also helping markets, analysts said, was the decline in oil prices. World oil prices skidded further, extending losses to 16 per cent in a week, as traders sold crude futures in anticipation of an OPEC deal to hoist supplies from April.
There is no unanimity on whether the market correction will resume, with the old industry stocks that make up the Dow's blue-chip index still showing plenty of strength last night. "How long-lasting this is going to be is anybody's guess," said Credit Suisse First Boston food and industry analyst Mr Justin Scarborough. "The problems that old economy food companies have had over the course of the last year or 18 months . . . are still there, whether this is a dead-cat bounce or not," he added.
With British banking shares driving the FTSE ahead more than 100 points as the technology-heavy Techmark fell over 5 per cent, Irish banking shares had the best day for many weeks with Bank of Ireland hitting a high of €6.47 before closing 53 cents higher on €6.30. AIB was up 33 1/2 cents on €8.73 1/2, while Irish Life & Permanent was 55 cents higher on €7.95.
With the Dow firming by the hour after the Irish market closed, dealers believe the Irish banks may rise further when the London market opens this morning.
Technology shares took a pounding, with Baltimore down £12.50 to £107.50 sterling in London, well off the recent £150 high.
Iona was down more than $4 in New York while the recently floated Riverdeep lost 50 cents to €7.75 in Dublin and was more than $7 lower on $42 3/8 in New York.
