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Markets News Friday: European car sales fell 1.6% in 2009 - - Germany up 23%; Ireland down 62%; Shares rise in Europe and Asia; Oil price falls
By Finfacts Team
Jan 15, 2010 - 12:29:11 PM
Following a marked decline in the second half of 2008 and the first half of 2009, European new car registrations picked up in the second half of last year, largely due to the impact of car scrappage schemes in a number of major markets, according to the Associationof European Automobile Manufacturers/ des Constructeurs Européens d'Automobiles (ACEA), based in Brussels. In total, 14,481,545 new cars were registered in 2009; 1.6% less than in 2008 and 9.5% less than in 2007. In December 2009, demand for new cars rose by 16.0%, amounting to 1,074,438 units compared to the same month in 2008.
In Western Europe, new car registrations were up 19.3% in December, reaching 1,003,757 units. Markets in Switzerland (-4.4%), Germany (-4.6%), Finland (-8.1%) and Portugal (-17.9%) declined compared to last year, while registrations increased by 16.7% in Italy, 25.1% in Spain, 38.9 in the UK and 48.6% in France. The West European market ended the whole year 2009 on levels similar to 2008 (+0.5%) and down 7.9% compared to 2007. In 2009, only Austria (+8.8%), France (+10.7%) and Germany (+23.2%) posted growth compared to 2008, with results lifted by scrapping incentives. Results were cushioned for similar reasons in Italy (-0.2%), the UK (-6.4%) and Spain (-17.9%). In total, 13,632,918 new cars were registered in the region.
In Ireland sales fell 62.1%
In the new EU Member States, December results were positive for only the Czech Republic (+43.8%) and Slovenia (+12.4%). Elsewhere, the downturn prevailed, ranging from -3.9% in Poland to -79.3% in Latvia and resulting in an overall 16.5% decrease in the region. From January to December, only the Czech Republic (+12.5%) and Slovakia (+6.7%) recorded a significant increase. The region as a whole faced a 26.6% downturn with 848,627 new cars registered, compared to 1,156,169 units in 2008.
The latest Heartland Monitor poll of middle class Americans, sponsored by National Journal magazine and Allstate insurance, finds 55% of Americans believe the country is on the wrong track - the highest percentage yet in the series. In addition, President Obama's job approval rating has dipped to its lowest position in the series, to 47%, but 52% believe the country is beginning to move in the right direction because of his policies. Opinion on the administration's economic policies is divided, with Americans split over whether they have been ineffective while raising deficits (46%) or have prevented an even worse crisis and set the stage for recovery (43%).
Collectively, elected officials were regarded as being out of touch with the concerns of everyday Americans: 80% said government officials had done a fair or poor job of addressing financial issues and 60% said banks, investment companies and major corporations were the main beneficiaries of federal action, as opposed to middle class and low-income individuals (17%). Respondents were evenly divided over whether this was an issue of design (48%) or poor execution (46%.
"Hope was the great anthem for President Obama's 2008 campaign, but for many Americans these days, hope seems in very short supply,"said Atlantic Media Political Director Ronald Brownstein. "The latest Allstate-National JournalHeartland Monitor poll underscores the long, long reach of this prolonged recession into all corners of American life - and the cost that it is imposing on public confidence in many of our economic leaders and institutions, from President Obama and Congress, to major corporations and the financial sector. In all, this incisive survey captures a season of discontent that has settled over America like a biting winter chill."
Middle class Americans feel ignored by Washington and corporations and are split over key economic policies, according to a new survey by Allstate and the National Journal. Allstate Chairman Tom Wilson discusses the results:
Gallup said Obama's initial approval rating in his second year as president is among the lowest for elected presidents since Dwight Eisenhower. Only Ronald Reagan -- who, like Obama, took office during challenging economic times -- began his second year in office with a lower approval score (49%). However, Obama's disapproval rating is slightly higher than Reagan's was (44% vs. 40%).
At this point, Obama doesn't have to worry about 2010 but the Democrats will face losses in next November's mid-term elections.
Economic View; Ireland engineering a real devaluation
Goodbody chief economist, Dermot O'Leary comments:"Although the policy focus for Ireland over the past year has been ensuring stability in the public finances and the banking system, the third, less understood, priority is the improvement in Ireland’s competitive position. When countries have suffered the kind of economic shock that Ireland has been enduring, the usual course of action is currency devaluation, either forced by the market or administered by the country in question.
Ireland, of course, does not have such a policy tool available so has to engineer a real devaluation by cutting costs across the economy. There are numerous examples that this process has now begun. For example, the differential in consumer prices between Ireland and the rest of the euro-area narrowed by 4 percentage points in the past two years. This equates to 20% reduction in the differential, which now stands at 16%. While pay rates are not out of line with other developed European economies, these have started to adjust downwards in Ireland too. Thirdly, the fall in property prices and rents increases the attractiveness of setting up business or working in Ireland. More government focus is now needed on areas that they have direct control over, like the minimum wage and utility costs, where Ireland does not compare as favourably, although some progress has even been made in relation to the latter. A real devaluation is not a process that happens overnight but Ireland is certainly going in the right direction."
CNBC's John Harwood has the latest on the bank bonus backlash:
US markets
On Thursday, the Dow rose 30 points or 0.28% to 10,711.
The S&P 500 rose 0.24% and the Nasdaq added 0.38%.
Retail sales unexpectedly fell in December, the Commerce Department said yesterday.
Asia
The MSCI Asia Pacific Index gained 0.5% Friday.
The Nikkei 225 rose 0.68% and the Shanghai Composite added 0.27%.
In Europe, the Dow Jones Stoxx 600 is up 0.20% Friday.
In Dublin, the ISEQ is up 0.47%.
Both AIB and BoI have gained 4.7%.
Greece's government plans to reduce its budget deficit to 3% by 2012. "It is doubtful if the Greek government will succeed in implementing the austerity measures up to 2012," Ulrich Rathfelder from Helaba said Friday. He sees strike action happening in the country due to the proposed measures.
The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009.
On Monday, the BDI rose 8 points or 0.2% to 3,148. The index rose 12 points or 0.38% to 3,160 on Tuesday and on Wednesday, it gained 15 points or 0.47% to 3,175.On Thursday, the BDI rose 60 points or 1.89% to 3,235.
Ireland already well funded for 2010 after strong bond issue
Davy chief economist Rossa White comments: "Ireland issued a new €5bn bond yesterday, which means that it has already completed more than half of its required funding for the year. The new bond, with an October 2020 maturity, was sold much more cheaply than its close relative last June. The National Treasury Management Agency (NTMA) has already announced 11 auctions for the year. The total amount raised at those auctions will cover this year's remaining funding requirement and leave Ireland heading into 2011 with healthy pre-funding, similar to the end-2009 position.
The numbers stack up as follows. Heading into 2010, there was a carryover of almost €6bn in long-term funding to finance this year's government borrowing. The borrowing target is €18.8bn to finance the deficit. A further €1.2bn is required for refinancing of long-term bonds. That leaves €20bn to find, of which €11bn has been met as of yesterday. The aim is for each of the 11 auctions to raise €1-1.5bn — the first one is next Tuesday. At a conservative €1.25bn on average per auction, the state would have €5bn left over at year-end to meet 2011 commitments.
This arithmetic makes no allowance for funds required to meet the capital shortfall in Anglo Irish Bank or other banks if required. But keep in mind that there is a further cash cushion of €22bn in the exchequer account at the Central Bank. This was always likely to be run down over time — it was added to through short-term borrowing as insurance against any shocks in the really difficult period of 12-15 months ago — and some of it could be used to meet banking needs. Most importantly, the cost of funding has dropped since Budget 2010 — despite the disruption caused by Greece. Yesterday's bond cost 162bps more than the German benchmark compared with a spread of 244bps last summer."
Goodbody's Dermot O'Leary also commentes: Economic View; NTMA pragmatism – 25% of 2010 funding raised yesterday: "In one fell swoop yesterday, the NTMA secured funding for 25% of Ireland’s 2010 funding requirement. Adding yesterday’s €5bn fund raising thorough an 11-year bond issue to the carryover of long-term funding from 2009 of €5bn puts Ireland in a comfortable position at a very early stage of the year as regards to funding the large budget deficit.
The NTMA also has a large holding of cash available to it. Importantly also, the large syndicated issue was done at a significantly lower price than the previous large issue last June. At that time, the spread over German bunds stood at 2.44%, while yesterday’s issue was completed at 1.62% over German bunds, with a yield of 5.09%. Like last year, it appears that the NTMA is taking a pragmatic approach to ensuring funding for the Irish state. Given the ongoing issues around Greece, it is probably a wise approach to take."
