SHARE prices in both Dublin and London surged to new all time highs in heavy trading yesterday as investors responded to the overnight 60 point gain and further early gains on Wall Street. Over £250 million was added to the Irish market, bringing the value of Irish shares to £16.2 billion.

By the close of trading, the ISEQ Overall Index was up almost 1.6 per cent to a new high of 2270.45, a rise of 36 points on the day, while the FTSE index of the 100 leading British stocks was 27 points higher on 3716, also a new high. The surge in demand in Dublin, London and continental markets resulted from the move the previous night to an all time high on Wall Street.

In Dublin, the main focus of attention was on Smurfit, which had its best day's trading for a long time, mainly due to the 10 per cent overnight jump on Wall Street by JS Corp. Smurfit closed 7p higher on 156p but was out shone by the two main banks which rose strongly. AIB was 8p higher on 352p while Bank of Ireland was 11p higher on 465p just short of its own all time high.

The strong London market was driven by the record breaking New Year trading on Wall Street rather than by any new enthusiasm for the direction of the British economy or re election prospects for John Major's administration.

After last year's 20 per cent rise in British share prices, most equity strategists are being restrained in their 1996 forecasts, citing the wall of political uncertainties to be climbed as the country's general election draws nearer. At best, a minority of equity pundits, including SGST and Charterhouse, is projecting an increase in the FTSE 100 index to within the 4000 4250 range by the end of 1996 in response to low inflation, falling interest rates and recovery in the government's poll ratings.

But most forecasters are much less sanguine. UBS is putting the FTSE at 3800 by the end of the year, BZW and SG Warburg are both on 3750 while NatWest Securities is forecasting 3,700, a fractional decline on last night's record close.

In New York, the market opened strongly after its 60 point gain the previous day and as European markets closed, the Dow was 19 points higher just short of 5200. Dealers in Dublin felt that weaker American bond prices might cause a weakening in equity prices. At the New York close, the Dow was 16.62 points higher on 5,194.07.

European markets were also pushed higher although some strategists expressed surprise at the scale of yesterday's gains.

"Lower interest rates should drive the markets in the first half of the year, followed by a growth recovery in the second hall," said Mr Richard Davidson, European strategist at Morgan Stanley in London.