Markets News Monday: Taoiseach warned that delivery of 2011 spending targets will be major challenge; ECB expected to raise rates on Thursday
By Finfacts Team
Apr 4, 2011 - 9:27 AM

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Ireland's Economy: A briefing note prepared for the Taoiseach Enda Kenny by his Department, warns that meeting 2011 fiscal targets, will pose major delivery challenges:  "delivery of 2011 expenditure targets will pose major challenges, particularly in terms of efficiency savings in the public service;  tax returns will also be dependent on growth outcome;  any slippage on expenditure side will require further discussions with IMF and possible corrective measures."
The briefing says
"there is need to prepare for further adjustments over 2012-14 period, including expenditure review:  a comprehensive expenditure review is an opportunity to reflect Programme for Government priorities in revised spending estimates for 2011-14, while providing certainty about expenditure for those years; however it is a major undertaking."

Documents were released to the Irish examiner under the Freedom of Information Act.

The second document here is on the economy.

Market to focus on ECB and Bank of England policy meetings: Davy economist, Conall Mac Coille, comments  -- "Both the European Central Bank (ECB) and Bank of England (BoE) will hold their monthly policy meetings this week. European output price data are expected to indicate that companies raised prices by 6.7% in the year to February, and by 0.8% on the month. These supply chain price pressures will reinforce expectations of a rate rise by the ECB this week. Markets have priced in a rate rise in April following ECB President Trichet's comments at last month's press conference, which were interpreted as signalling that a rate rise was imminent.

In an otherwise slow day for macroeconomic data, the market may also focus on the release of the EC Sentix investor confidence survey which is expected to fall slightly from 17.1 in March to 16.0 in April. The Sentix measure has recovered steadily to similar levels to those that preceded the intensification of the credit crisis around September 2008, but rising oil prices and the prospect of an ECB rate rise may have contributed to a small decline in confidence in April. And for the same reasons, Irish consumer confidence, due to be released by close of business Tuesday, is likely to indicate that the Irish consumer sees little improvement in economic prospects.

In the UK, a rise in the BoE's policy rate and the prospect of a rate rise at the May meeting is far less certain than the market expects in our view. On Friday, the UK manufacturing PMI fell very sharply from 60.1 to 57.9. This could indicate that some of the weakness in the consumer spending indicators released over the recent past is beginning to bear down on UK manufacturing output. And most economic forecasts for the UK rely in rebalancing of the UK economy away from domestic demand to the manufacturing export sector. But Friday's release indicates that the pace of expansion in UK manufacturing slowed sharply in March. Today, the UK PMI for the construction sector is expected to fall back to 54.8 in March from 56.5 in February.

The minutes of the last Monetary Policy Committee (MPC) meeting indicated that most members wanted to see more evidence of the strength of activity in the UK economy in the first half of 2011. So, with the indicators suggesting a slowdown in both construction and manufacturing and the outlook for the services sector and consumer spending remaining weak, the MPC is unlikely to raise rates this month."

Mitul Kotecha, head of global FX strategy at Credit Agricole CIB, says the ECB will lift rates this week to combat rising inflation:

Petroceltic: Davy analyst, Caren Crowley, comments  -- "Petroceltic has released (April 4th) its preliminary results for the 12 months to end-December 2010.

Analysis: The results give some colour on the much anticipated partial farm-out of Petroceltic's 75% interest in the Isarene licence in Algeria. A farm-out transaction has been agreed with a third party and is awaiting approval from state authorities. The proposed transaction will provide Petroceltic with a refund on certain back-costs, a ‘substantial’ carry on the current appraisal drilling programme and a deferred consideration which will be contingent on the success of current drilling.

Management has reiterated its guidance for the large gas condensate Ain Tsila discovery on its Algeria licence. The guidance concludes a best (P50) estimate of 6.1 TCF of gas initially in place. Previous guidance was also for 1-5 TCF of contingent (recoverable) resources (Davy: 3.6 TCF).

In Italy, management is focused on drilling the onshore Rovasenda prospect (270 mmbbl prospect, PCI:47.5%) in 2012. We think a farm-out of some of Petroceltic's interest in this prospect is very possible before the commencement of drilling. Petroceltic does not expect to drill to the offshore Elsa-2 appraisal well in the in next 12 months.

Acquisition opportunities, both at a corporate and asset level, continue to be assessed while cash at the end of March 2011 was $66.3m.

Davy View: The results contain no catalyst for changing our 30.7p per share group valuation. The key event for the stock, rightly or wrongly, remains the approval and announcement of a farm-out transaction for some of Petroceltic's equity in its licence in Algeria. Guidance regarding timing is that a formal response from the relevant Algerian authorities on the proposed farm-out transaction is expected in the near future."

Greek Finance Minister George Papaconstantinou spoke to CNBC in Ambrosetti about his country's debt crisis:

Asia Markets

The MSCI Asia Pacific Index rose rose 0.6% to a three-week high on Monday.

Japan's Nikkei 225 rose 0.11%; China's markets were closed Monday; Australia's S&P/ASX 200 Index gained 0.51% and the Bombay Stock Exchange's Sensex index climbed 1.17% in Mumbai.

Asia benchmarks

Finfacts Reports

Bord Gáis Energy Index rose 3% in March; ESB to cut Irish electricity bills by up to 17%
Global manufacturing growth remained robust in March 2011
US jobs market improves moderately; 36% of workers in new jobs took pay cut of 20% or more
Microsoft, Facebook and the common woes faced by startups/ young companies
Society of Chartered Surveyors says home insurance rates should fall because of decline in Irish house rebuild costs
US economy continued to add jobs in March providing signs of an improving economy
Eurozone unemployment down to 9.9% in February; Netherlands at 4.3%; Ireland at 14.9%
Eurozone manufacturing expansion eased in March from February’s ten-and-a-half year peak

In Europe, the Dow Jones Stoxx 600 is down 0.09% in early trading Monday.

The ISEQ has risen 0.27% in Dublin.

Bank of Ireland has jumped 11%; AIB has risen 7% and IL&P has tumbled 10%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report


The euro is trading at $1.4225 and at £0.8816.

For live currency updates, check the right-hand column of the Finfacts home page.

The US dollar fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.


The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Friday last week, the BDI slipped 10 points or 0.65% at 1,520.

The Financial Times reported earlier in January, that Australia’s flooding and fears of ship oversupply has pushed down a gauge of the cost of hiring ships to carry coal, iron ore and other dry bulk by nearly half since October to the lowest level since the aftermath of the financial crisis. The Baltic Dry index, the widely watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak reached on October 27, 2010.

Crude oil for May 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $108.54 per barrel, up 60 cents from Friday's close. In London, Brent for May delivery is trading on the International Commodities Exchange at $119.25. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is almost  $11.

The FT said in early February that a surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, has depressed the value of the benchmark against other yardsticks. The International Energy Agency said on Thursday that with “few relief valves” to cut the stock overhang in Cushing, the price dislocation “may persist for months [or years] to come”.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,434.10, up $5.20 from Friday's close.

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