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ISEQ back above 2,900 but US data weighs

Friday, July 30 17:45:44

The main Dublin shares index closed the week only marginally up as markets reacted to US GDP data with fears rising that the US recovery is stalling and that the world's biggest economy may face a dreaded "double dip".

The ISEQ rose 4.61 points to 2,915.36.

Irish and European investors played a waiting game this morning. The dollar fell to an eight-month low against the yen while European and Asian shares slipped. Wall Street stocks fell on Friday after weak economic growth figures for the second quarter and disappointing earnings from Merck painted an uncertain outlook for the rest of the year. A jump in a barometer of U.S. Midwest business in July, however, helped indexes cut some losses. Adding to the gloom, U.S. consumer sentiment plunged in July to its lowest level since November 2009 on bleak prospects for jobs and income a year since the economic recovery began.

Banks were largely weaker - once again - with AIB stocks remaining unmoved at E0.94, Bank of Ireland managed a gain of 3c to E0.85 and Irish Life and Permanent inched down 1c to E1.75.

AIB will report interim results next Wednesday, August 4th. Updates on funding and the business disposal process are the most important issues, but analysts will also be looking for signs of stability in the Irish loan portfolio of the bank as well as greater certainty over NAMA-related write-downs. Davy are forecasting a pre-provision profit of E700m for the first half and non-NAMA bad debt provisions of E1 billion.

CRH investors had their eyes on developments in the crucial US market. The US House of Representatives has voted by 251 to 167 to approve the full year 2011 Department of Transportation, Housing, and Urban Development Appropriations Act. This legislation will provide USD45.2bn for federal highway investment and USD11.3bn for public transportation in 2011. In the absence of a new highway bill, an extension of funding through 2011 is critically important for the US highway construction industry, according to Davy analyst, Robert Gardiner. "This latest extension not only addresses the funding situation for 2011 but also raises the federal highway contribution by $4.1bn to $45.2bn. This represents an increase of 10pc year-on-year and should go some way towards filling the gap left by stimulus funding rolling off," he said. However, this was not enough to convince economy-focussed investors to buy CRH and the stock fell 23c to E16.03.

Kingspan has announced the appointment of Geoff Doherty as Chief Financial Officer designate. He will take up his new role on January 1st next and will replace Dermot Mulvihill, who will retire. Shares in the buildings insulation group rose 2c to E5.38.

Smurfit Kappa announced a E60 per tonne price increase for recycled container board grades to be implemented from September 1, which is in line with what both SCA and Europac recently reported. This price increase comes shortly after the company announced a similar increase on Unbleached Kraftliner recently and the company attributes this hike to a necessity for cost recovery and positive market dynamics. Goodbody said it believes the increase is well underpinned by the group's fundamentals. Smurfit's shares rose 4c to E7.91.