BOUNDING overseas markets - in New York all week and yesterday in London - failed to provide much stimulus for a pretty stagnant Irish stock market, and share prices drifted lower. The market seems, however, to have found some support with the ISEQ around 2,620 and there are some hopes that, once the British budget is out of the way, buyers will return.
Smurfit has had little good news for investors this year, and certainly was quick to quash rumours of a JS Corp buyout, a development that few shareholders would welcome. Buying out the Morgan Stanley stake will undoubtedly happen but it is difficult to see Smurfit doing something like this until late 1997 at the earliest.
Salomon Brothers began coverage of Smurfit with a bullish report and a "buy" recommendation. In truth, there was little new in the sections of the report that Salomon and Smurfit were willing to reveal to the media (13 pages out of 70), but it still triggered a bout of trading in the share in London. The London trading in Smurfit soon fizzled out, however, and the share seems to be locked in a trading range in the mid 160s.
Financial shares were generally weaker in some sizeable trading, and it is difficult to understand the current penchant to sell the sector, given the very attractive yield gap against domestic gilts and the British clearers. There are some tentative signs that convergence trading will resume on the Irish market, something that should drive gilt yields lower and financial shares higher.
Another to weaken for no clearcut reason was CRH, which saw some sizeable selling even though its peers in the British building materials sector did not suffer similar treatment. CRH seems to have stabilised just above 600p and at that level does seem reasonable value - even though the upside may be limited.
The food sector was pretty quiet, but results from some competitors in Britain show just how difficult the British liquid milk market is for dairy processors.
Avonmore and Waterford both have extensive British liquid milk interests and are suffering from a squeeze on margins.
Northern Foods and Unigate are two of the biggest dairy processors in Britain and both reported pretty dismal results from their dairy operations, while the Danish group MD Foods is rumoured to have lost £20 million in its British dairy business.
Northern's Chris Haskins has a pretty hefty shake out in the industry in the next 12-18 months, and no doubt Avonmore and Waterford will be aiming to be involved - on the buying rather than the selling side.
Still, not everybody in the British dairy industry is doing badly and the Scottish group Robert Wiseman proved that it is possible to increase profits in a hugely competitive market.
Overall, the biggest trading in the week was in AIB, Irish Life and Kerry Group while Tullow continued to trade in size without the share price going anywhere. Where the Tullow price will go from here will largely depend on the market's perception of Tullow as a takeover target and on further drilling results from Pakistan.
