Irish shares hit all-time high despite tariff uncertainty

Irish Independent

11 hours ago

The Iseq 20 index of leading Irish shares hit a record high of 1963.01 yesterday, slipping back only slightly before closing at 1,956.02. The index is made up of the leading shares on the Euronext Dublin exchange, including heavyweights Ryanair, Kerry, Kingspan and Glanbia as well as AIB and Bank of Ireland.
Shares hit their high after the European Central Bank (ECB) cut rates for an eighth time in 12 months on Thursday, a move that would traditionally be seen as a boost to investment, credit and consumer confidence.
The MSCI global index, which draws on leading shares from across the developed world, hit an all-time high on Tuesday, boosted by particularly strong gains for Germany's Dax index.
In Ireland, the Iseq 20 index only at the start of this year recovered to levels seen in 2007, at the peak of the Celtic Tiger, unlike most European and US markets where shares have long since pushed higher over the past decade.
However, the composition of the Irish shares indices has also radically changed, not just since 2007 – when bank shares crashed – but in the past three years as heavyweight stocks like CRH, Flutter and Smurfit Kappa shifted their listings to the US, shrinking the potential size of the Irish index.
The Irish high this week was in line with global and European trends. Wall Street rebounded yesterday after a generally upbeat employment report, and a bounce-back in Tesla shares helped put the indexes on track for weekly advances.
In the US, jobs numbers yesterday were relatively weak but not as bad as feared, and markets shifted higher in response.
This is a sigh of relief report
The US economy added 139,000 jobs in May while the unemployment rate held firm at 4.2pc, according to the Labour Department.
'This is a sigh of relief report; people were really worried that this was going to be a kind of start of a downturn in the labour market and therefore start the downturn in the economy,' said Scott Ladner, chief investment officer at Horizon Investments in Charlotte, North Carolina.
'It came in pretty much on the screws and we've got a bit of a reprieve, at least for a month. That's leading to a pretty large relief rally,' Mr Ladner added.
In Ireland and across the globe, investors are increasingly looking past the near-term risk of Donald Trump imposing further destabilising tariffs and anti-trade measures, and are focused on the underlying economy, which has so far shrugged off any real negative fallout.
How long that can be sustained remains to be seen.
Bank of America's influential strategist Michael Hartnett warned yesterday that global stocks are getting close to triggering a technical 'sell' signal, saying the market is running too hot after surging 20pc in just two months.
He cited data points on fund flows and market breadth as evidence that investors have been rushing into risk assets and positioning is getting stretched. Traders often use that as a marker because it can theoretically indicate that the buying power in the market is likely to soon be exhausted, leaving prices vulnerable to a pullback.
At the same time, the market is approaching 'overbought territory,' he said.
The Bank of America data highlights a nervousness among traders about the rapid pace of recent stock gains. The combination of the Trump administration's tax-cut package to boost growth, plus a softer stance on tariffs and robust economic data, has fanned optimism.
US equity futures rallied yesterday after the monthly jobs report came in stronger than expected.
In Europe, the new German government's push to support industry as well as ECB easing of credit has fed into the rising stock markets.
However, major risks are hovering close to the surface. Mr Trump has set a July 9 deadline for talks with the European Union to produce a trade deal, threatening a 50pc tariff on European goods if they fail.
The White House has yet to lock in trade terms with China, Japan or Canada.
Meanwhile, Mr Trump's public falling out with Elon Musk has been playing on stock markets as the main driver of swings in Tesla's share price, both higher and lower at different times this week.