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After a meeting with leaders of Congress on Tuesday, Feb 09, 2010, President Obama said: I am glad to see that all of you braved the weather to be here. A little while ago I had a meeting with the Democratic and Republican congressional leaders, and it went very well. In fact, I understand that McConnell and Reid are out doing snow angels on the South Lawn together. (Laughter.) Can you picture that, Chuck? Not really?
US President Barack Obama on Tuesday urged both Democratic and Republican lawmakers to approve a jobs bill and take actions to reduce the deficit.
"As I said in my State of the Union, part of what we'd like to see is the ability of Congress to move forward in a more bipartisan fashion on some of the key challenges that the country is facing right now," said Obama at an unscheduled appearance at the daily White House briefing, adding that the American people "are frustrated with the lack of progress on some key issues," in reference to bills to promote jobs and cut the budget deficit. "A good place to start, and what I hope to spend a lot of time on in these discussions today, is how we can move forward on a jobs package that encourages small business to hire," Obamasaid after meeting with congressional leaders of both parties.
"Another area where I hope we can find some agreement is on the issue of getting our deficits and debt under control," said Obama. "Both parties have stated their concerns about it. I think both parties recognize that it's going to take a lot of work," he added and confirmed he had put forward the idea of a bipartisan fiscal commission. "I'm going to be discussing both with my Democratic and Republican colleagues how we can get that moving as quickly as possible so that we can start taking some concrete action," said Obama.
"I think the American people want to see that concrete action," he added.
Economic View; Support looks to be on the way for Greece: Goodbody chief economist, Dermot O’Leary, comments - - "In recognition that our problem is their problem too, European policymakers indicated yesterday that they would stand behind Greece in its hour of need. Although the details of any assistance are unknown at this stage, it is clear that the issue will be the top of the agenda at an EU summit which is to get underway tomorrow. Any support is likely to be conditional on Greece meeting certain commitments to tackle its budget deficit, with Germany seemingly leading the way in its formulation given the comments from its financial affairs spokesperson yesterday that it is considering support.
That the EU looks set to give financial support to Greece is not much of a surprise, given that the contagion risks from any fallout for the rest of the euro-area, but particularly for those countries with large fiscal deficits, are real. The surprising element of this though is the speed at which it looks to be going ahead, given that it was only last week that the European Commission backed Greece’s stability program for reducing its deficit. Yields on Greek 10 yr bonds fell by 37bps on the news yesterday, while Irish yields also fell by 9bps. The euro enjoyed a relief rally too, while equity markets also responded favourably to the news. While the details of the aid still have to be ironed out, and there are some disagreements between some EU members, one would think that this news is exactly what the markets needed to ease jitters that were abounding about the risk of a sovereign crisis over the past two weeks."
It is "critically important" that Greece receives support to solve its sovereign debt problems because a default would have serious repercussions for the whole Eurozone region, Linda Yueh from Oxford Analytica told CNBC Wednesday:
Savage price discounting hints at further shrinking margins or deeper cuts in wages and rents: Davy chief economist, Rossa White comments - - "Irish retail prices have fallen dramatically across many categories of goods during the recession. That price discounting was necessitated by the dramatic drop in demand. But it was helped by the strong euro and secular decline in wholesale prices for some goods (e.g. electrical goods and clothing). We reckon that many retailers (especially some of the larger foreign-owned chains) entered the recession with fat margins. But those margins have slimmed down, and rents and wages are likely to come under further pressure.
Our analysis shows ongoing sharp price deflation at the majority of Irish retail outlets. We created a synthetic price index by deflating the value of (seasonally adjusted) retail sales by the volume index. It allows us to compare prices more readily across categories of retail goods, something that the CPI does not facilitate. Some of the price declines are staggering: electrical goods down 37% from peak; clothing down 22% since mid-2007; furniture and lighting reduced by 26%; items at department stores slashed by 21%; and discretionary goods (such as jewellery, toys and mobile phones) cut by 19%.
In fact, discounting seemed to end during 2009 for only five of the 13 retail categories: specialised food shops; furniture/lighting; clothing/footwear; petrol stations; and DIY. It is interesting to note that supermarket prices have slid only 6.5% from the peak in July 2008, despite the strength of the euro against sterling and the foothold garnered by discount multiples. But it is probably the smaller outlets, rather than the larger multinational chains, that may not be able to cope with further margin contraction during 2010. The clamour for re-examination of retail rent legislation is likely to grow much louder."
Competition Authority to review incinerator contract
The contract for Dublin City's Council's incinerator at Poolbeg, Ringend, in South Dublin, is claimed as anti-competitive and illegal in a complaint filed with the Competition Authority.
Dublin City Council has confirmed that the Competition Authority has begun to investigate a complaint submitted by the Irish Waste Management Association. However, the council said work on the site would continue.
The Irish Waste Management Association, which represents most independent waste collectors.
They say that the deal between Dublin City Council, Covanta Energy and DONG Energy Generation is anti-competitive and, as such, the contract should be regarded as illegal and void.
US markets
Following news of possible loan guarantees for Greece and other debt-laden Eurozone members, US investors reacted positively on Tuesday.
The Dow crossed back over the 10,000 level and rose 150 points or 1.52% to 10,059.
The S&P 500 added 1.30% and the Nasdaq rose 1.17%.
Honda's recall of over 400,000 cars globally due to defective airbags is just a garden variety recall, says Erich Merkle, president of Autoconomy.com. He tells CNBC's Martin Soong and Kaori Enjoji why. Merkle also assesses the road ahead for rival, Toyota.
Asia
The MSCI Asia Pacific Index rose 0.3% Wednesday.
The Nikkei 225 gained 0.31% and teh Shanghai Composite climbed 1.14%.
In Europe, the Dow Jones Stoxx 600 has risen 1.35% Wednesday.
In Dublin, the ISEQ is up 1.67%.
CRH has gained 3.13% and Elan has risen 0.25% -- see report on today's earnings report via link in Box above.
Smurfit Kappa has risen 0.15%.
Paper and packaging group Smurfit Kappa today reported a pre-tax loss of €52m for 2009, compared with a loss of €11m in 2008.
Revenue fell 14% to just over €6 billion, while underlying earnings - or EBITDA - fell by 21% to €741m.
CEO Gary McGann describes the performance as resilient, in the context of a "significant collapse" in demand and market prices.
Goodbody analyst Robert Eason comments: "Smurfit Kappa has reported fourth quarter EBITDA of €186m, which compares to our forecasts of €176m and consensus range of €165-182m. This represents a moderation in the rate of decline to just 5% versus -17% in Q3, -29% in Q2 and -30% in Q1. As expected there was some qoq pressure on margins (12.1% in Q4 versus 12.7% in Q3, 12.3% in Q2 and 11.9% in Q1), reflecting the lag effect of passing on costs.
At an EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)level, the main variances were stronger performances from both the European and Latin American packaging operations, which offset a weaker outturn in specialities. Net debt for the end of December came in at €3,052m, representing 4.1x EBITDA, which was behind our forecast of €3,017m. The key differences were a higher tax charge, some exceptionals and €26m of deferred debt issue costs amortised. We take comfort from a €50m increase in the cost take out programme and improving top-line trends.
Despite rising cost pressures and the adverse impact of Venezuala, management still expects meaningful overall EBITDA growth in 2010, a reflection of improving prices, a better demand backdrop and an increased cost take-out programme. Overall, we will not be making any changes to our forecasts, which were recently increased to an EBITDA of €851m."
Goodbody analyst, Eamonn Hughes comments: Irish Financials; Honohan gives some answers, but others still open-ended - - "The Central Bank Governor spoke at a college alumni meeting yesterday morning and naturally enough made a few comments on the banks. We note a few points.
In terms of timelines, he indicates the cost of recap for the banks “will become clearer over the coming weeks". It probably goes without saying that the banks will be in a better position post the NAMA haircuts, but we are unclear whether his comment about “weeks” means we will all know after the initial tranches transfer across (supposed to be end next week) or a bit further out.
So the main issue is capital and he is not sitting on the fence in indicating that he doesn’t think the banks can raise the required capital all by themselves. He indicates that the capital required will be a “sizeable sum”, though he appears to think that the banks can only raise “some of what is needed” themselves through asset sales, new equity issuance and discounted buybacks and that “it is pretty clear that the government will be acquiring additional equity stakes”. This has been building for some time, but gets a certain weight when uttered by the Central Bank governor.
Our read is that this comment probably hints that the capital raises are going to be the full figures required to get capital to appropriate levels, and in one go, rather than in a number of tranches. Our thoughts around this have moved to the same conclusion in recent weeks. As such, our commentary lately has supported our view of the need for AIB and BOI to raise €4bn (net of M&T disposal) and €3.3bn respectively in the months ahead to get core equity ratios to c6-6.5% at the bottom which would run up to 8% by end 2014 (our real target) due to retained earnings in 2012-14. On balance, though, his view appears to be that the State will be acquiring meaningful stakes in the banks and we harbour back to his comments in early January where he commented that the outlook for Ireland’s banks was akin to what happened in the UK – which we presume he means a majority shareholding in the case of RBS and large minority share of LLOY."
Eamonn Huges also commented: Irish Financials; Bank of Scotland (Ireland) to pull out of retail banking. - - "Bank of Scotland (Ireland) yesterday announced that after a strategic review it is closing its retail branch network in Ireland on a phased basis from late May. It is closed immediately for new business and is also closing its intermediary business and support services. The decision will unfortunately see 750 redundancies at the business. The review indicates that the retail business lacks scale given the current environment and that BOSI will now focus on its SME offering.
The move sees a further contraction of players in the mortgage space reflecting the difficult market conditions. On the first count, from an economic perspective, we expect the impact on credit availability to be relatively muted, particularly since the Halifax brand was particularly active in the switcher space, with its low LTV (loan to value) offerings. Cleary, the long term prognosis on that business is for more muted activity. Moving onto margins, one could make the case that less supply ultimately is good for margins for the remaining players, though having said that, we have been strongly making the case for months that margins in mortgage lending in Ireland are still too low.
Central Bank data shows average spreads around 170-180bps, which compares to figures over 300bps on SVRs in the UK. That latter figure also looks extreme, but we think a figure somewhere in the middle is where spreads will ultimately normalise. Finally, the move by BOSI to retain its SME business highlights to us that this is the space ultimately in which banking earns its higher returns. However, the more immediate focus is that Lloyds’ is probably playing the odds of at least having a tighter ship in case it ultimately gets called into the “third force” to give it a bit on an SME angle (not our base case due to its high loan to value and why would the Irish government want to increase its exposures). To wrap up, the plan by BOSI to tackle its cost base is surely on the agenda at all banks as the level of revenues continues to dwindle and would be a “story” the banks could focus on when they come looking for equity from shareholders."
