Profit-taking and a bout of Asian flu triggered by the latest collapse in Korea and Hong Kong took the sheen off the Irish market yesterday, with heavy trading in the two main banking shares. There was also sustained trading in Smurfit after the overnight 3 per cent fall in the US packaging sector but the Irish group managed to confine its losses to just 4p and closed on 195p.
However, the market is still well above its pre-Budget level and the strength of the domestic economy, coupled with the equities-friendly aspects of the Budget, are still supporting the market.
The announcement by the Minister for Finance that he will not modify the Budget provisions relating to the treatment of tax credits on dividends came as no surprise and the fall in bank shares was not connected to the announcement.
Dealers reported sizeable trading in the banks, with AIB hitting a low of 657p before closing down 19p on the day on 661p, while Bank of Ireland recovered from a low of 1020p to close down just 10p on the day on 1030p. Other financials were also weaker, with Anglo Irish down 3p on 127p, Irish Life 13p lower on 375p while Irish Permanent was 10p weaker on 720p.
Smurfit lost 4p to 195p in response to the overnight weakness in the US paper sector which lost 3 per cent of its value. Analysts are finding it difficult to agree on whether Smurfit is or is not a "buy" at current levels, with every piece of positive news for the sector being followed quickly by some negative figures on capacity or inventories.
Greencore continued to benefit from a positive response to the trading statement with last week's results and closed up 8p on 325p. The market is mightily relieved that the group is not planning to increase its presence in the US sugar industry through Imperial Holly. On the other hand, the market will be expecting a hefty share buyback in the new year, especially if Greencore is unsuccessful in bidding for its main British target, Paul's Malt.
ILP did not trade from its overnight 25p sterling in Dublin, but closed up 5p on 29 1/2p sterling in London after disclosing that it has received takeover approaches. Any reasonable offer is likely to be welcomed by the suffering institutional shareholders - mainly British - who have seen the value of their investment fall by over 60 per cent since the March 1996 flotation.
Gilts shrugged off the higher-than-expected inflation figures and edged higher, benefiting from the positive US retail sales figures. The 0.2 per cent rise in US inflation in November was well below forecasts and is likely to reassure the members of the Fed's open markets committee ahead of its monthly meeting next week.
However the strong rise in the November monthly inflation data will have given the Irish market food for thought. It may mean that the Central Bank will take a more cautious approach to lowering interest rates in the New Year.
