European stock markets continued to push ahead firmly on the second day of euro-trading, although the gains were nowhere of the scale of the 5 per cent notched up in Frankfurt, Paris, Madrid and Milan on Monday.
And the Irish stock market, which underperformed the major continental markets on the first day of trading, made up some lost ground with the ISEQ Overall Index closing up over 2 per cent, spurred on by huge demand for AIB and Bank of Ireland, and renewed demand for Jefferson Smurfit.
Smurfit was boosted by a positive response on markets in Dublin, London and New York to the decision by its Smurfit Stone associate to raise linerboard prices by $50 a ton from February. Analysts believe that, even if Smurfit Stone cannot make the price rise stick from February, it is an indication that the merged group is prepared to take the lead in dictating prices in the sector.
In a research note, Credit Lyonnais Securities suggested that, if the industry was able to boost linerboard prices from $330 a ton to $400 a ton by 2000, this would benefit Smurfit Stone by $385 million (326 million euros) and the Smurfit group by $40 million.
While dealers on European markets welcomed the continued gains, there was some caution over corporate earnings and the German economy, after a gloomy forecast from German think-tank DIW.
DIW slashed its 1999 growth forecast for Europe's largest economy to 1.4 per cent from a previous 2.1 per cent. But Germany's finance ministry disputed the forecast and said it still expected growth of 2 per cent.
"After the excitement of yesterday we were expecting a rather calmer day and that is indeed what's happened; people are now settling down to life with the euro," said Mr Mark Cliffe, chief European economist at ING Barings.
"The forecast from DIW was pretty gloomy and that took some of the edge off the proceedings and reminded people that although euro may be a step forward, the real economy has problems to contend with, especially outside Europe."
Euro zone blue chips continued to hog the lion's share of cash as investors stuck to big, well-known names, and the Dow Jones Euro Stoxx 50 index rose 1.74 per cent.
Shares in Germany bucked the rising trend with the Xetra DAX index shedding 26.95 points, or 0.51 per cent, to end at 5263.41 after rallying more than 5 percent on Monday. German blue chips were weighed after leading software group SAP's shares sank 15 per cent to end at 328 euros.
Shares in London, left behind during Monday's euro euphoria, rose sharply with the FTSE 100 index ending up 1.3 per cent to a five-month closing high as telecom and drug stocks raced ahead.
Vodafone rose 5 per cent after confirming it was in merger talks with AirTouch Communications of the United States. British Telecom gained 6.3 per cent, accounting for 22 points of the FTSE 100 gain.
Despite a strong start, trading in the euro remained tentative yesterday with the new currency weakening marginally against the dollar. It drifted in a narrow range against the US currency and sterling throughout the day much as expected and was eventually upstaged by the yen.
Bank of Ireland Treasury economist, Mr Jim Power said the lacklustre performance of the euro was broadly in line with expectations. Investors would remain cautious about the application of new systems in coping with the new currency while dealers were still coming to term with its existence and would be waiting for more established trading ranges to emerge before liquidity picked up.
