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Markets News Tuesday: Irish Government begins new spending review; Insurance companies make €220m in payouts on weather claims
By Finfacts Team
Apr 12, 2011 - 9:23 AM

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Minister for Finance Michael Noonan (l) pictured at the Eurogroup meeting in the Royal Palace of Gödöllő, Hungary, April 08, 2011.

Spending Review: Minister for Public Expenditure Brendan Howlin said on Monday after a Cabinet meeting that he wanted to ensure Ministers were not “captured” by their departments into defending existing levels of spending.

He said the Cabinet agreed to begin the comprehensive spending review promised in the programme for government. The process will be completed in September before the annual estimates process.

Howlin said one cost-saving measure departments will be allowed to explore is the outsourcing of non-essential activity to the private sector.

He said he had brought two memoranda to Cabinet last night; one dealing with a process to curtail current spending and the other with capital spending.

“I wanted it to happen early in the life of the Government so that people wouldn’t be captured by their departments and have to defend every line of spending,” said the Minister.

Yesterday, the IMF cut its 2011 growth forecast for Ireland from 1% to 0.5%.

Insurance: The Irish Insurance Federation has reported that insurance companies have made payouts of more than €220m in compensation to home and business owners after last winter's severe weather. Claims of almost 30,000 were made in respect of damage caused by burst pipes.

Counties Cork, Galway and Dublin were worst affected by the worst weather in parts of the country in more than a century.

The IIF says that €224m has been paid out in compensation to date, with most of the claims made by home owners.

The IMF says there's no fear of a double dip as the recovery gains strength but it warns of high unemployment in developed economies. Oliver Blanchard, chief economist at the IMF, joined CNBC for more:

Economic View: IMF forecasts now being watched more closely in Ireland  -- Goodbody chief economist, Dermot O’Leary, commented - - "Forecasts emanating from the IMF in Washington have taken on a higher level of importance here in Ireland since the Fund’s arrival in late November last year. Yesterday, it published its latest World Economic Outlook. While global growth forecasts were left unchanged at a healthy 4.4% and 4.5% in 2011 and 2012, respectively, there was a notable downward revision for Ireland, albeit not unexpected.

When the Memorandum of Understanding (MoU) between the Troika (IMF/EU/ECB) and Ireland was struck last December the IMF pencilled in growth of 0.9% in 2011. It now predicts growth of only 0.5%, in line with our own estimate of 0.4% growth. For 2012, it left its forecast unchanged 1.9%. The significance of the forecast changes lies in what it means for the fiscal consolidation targets that have been agreed with the Troika. In the MoU in December, the Irish authorities stated that we 'stand ready to take any corrective actions that may become appropriate for this purpose as circumstances change.'

Quarterly reviews by the Troika determine whether any further action is necessary. One of these reviews is taking place at the current time. In our view, the most important milestones in this first review are in relation to the banking system, where important targets have been met. Interestingly, there were calls by the IMF yesterday for a cut in the interest rate that Ireland is being charged for its loans.

In relation to the fiscal targets, it is still early days and tax returns were largely in line with estimates in the first quarter of the year but there are warning signs that fiscal targets may indeed slip for the full-year, perhaps necessitating further action at the time of the second review by the Troika during the summer. At the very least, we would expect a downgrade from the Department of Finance to its 1.7% growth forecast for 2011 to arrive soon."

CEO Pay in the USA:

IMF lowers 2011 GDP forecast for Ireland but no change to expected rate of growth in 2012; little change to global estimates: Davy analyst Florence O'Donoghue comments  -- "As part of its twice-yearly world economic outlook, the IMF cut its 2011 forecast for Ireland yesterday (April 11th). It is now forecasting GDP growth of 0.5% this year, down from a forecast of 0.9% back in December. A higher rate of unemployment (14.5% in 2011 compared to the previous estimate of 13.5%) and a more downbeat outlook for the key export markets of the US and UK are factors in the downgrade of economic growth projections for this year. However, the IMF continues to predict GDP growth in Ireland of almost 2% in 2012. These updated forecasts are more pessimistic than our own expectations: we are forecasting GDP growth of 1.6% this year and 2.4% in 2012.

The IMF's revised forecasts follow a similar pattern for the UK: it is forecasting growth of 1.7% this year, down from its earlier estimate of 2%, but has not changed its 2.3% growth estimate for 2012. Overall, the IMF's global economic GPD forecast is little changed, with growth of 4.4% this year expected to be followed by a 4.5% expansion next year.

Elsewhere, figures released by the CSO on April 11th indicated that on a seasonally adjusted basis, Irish manufacturing volumes in February were 2.3% down on January but unchanged on February 2010. With the exception of a spike last July, manufacturing output in Ireland has remained quite steady since the start of 2010."

US Markets

In New York Monday, the Dow inched up 1 point to 12, 381.

The S&P 500 slid 0.285 and the Nasdaq slipped 0.32%.

Asia Markets

The MSCI Asia Pacific Index fell 1.4% Tuesday after Japan's nuclear safety agency raised the severity rating of the crisis at its nuclear plant to the highest level today, comparable with the 1986 Chernobyl disaster.

Japan's Nikkei 225 dipped 1.69%; China's Shanghai composite index slipped 0.05%; Australia's S&P/ASX 200 Index slid 1.46% and the Bombay Stock Exchange's Sensex index dipped 0.97% in Mumbai.

Asia benchmarks

Finfacts Reports

Allied Irish Banks announces over 2,000 job cuts after record €10.4bn net loss in 2010
Finland's finance minister warns of new financial crisis if Europe does not help Portugal
British retail sales in March were worst in 16 years; Housing market in doldrums
US farm subsidies face cuts; Europe's sacred cows safe despite rising food prices
Some 76% of UK mobile subscribers wasting £5bn each year by choosing wrong tariff/ not using free benefits
Markets News Afternoon: Japan hit by quake on anniversary of March disaster; Americans to cheat as much as $300bn in unpaid taxes this year
Central bank governor says new ECB medium-term liquidity facility for Irish banks not expected soon
IMF cuts Irish GDP 2011 growth forecast in half; Says global economic recovery gaining strength
France's last annual budget surplus was in 1974; National debt to GDP ratio up from 22% in 1975 to 82% in 2010
Renewables in EU27 energy supply at 9%; Main source for Latvia and Sweden
Irish industrial production grew by 0.2% in year to February; Output of pharmaceutical sector fell

In Europe, the Dow Jones Stoxx 600 is down 0.73% in early trading Tuesday.

The ISEQ has dipped 0.34% in Dublin.

CRH is down 1.23%; AIB has dipped  4.0% (see link to 2010 results in box above); FBD has risen 1.89%.

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

Currencies 

The euro is trading at $1.4424 and at £0.8853.

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.

Commodities

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 Monday this week, the BDI slipped 17 points or 1.23% at 1,359.

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 $109.22 per barrel, down 70 cents from Monday's close. In London, Brent for May delivery is trading on the International Commodities Exchange at $123.50. 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 over $14.

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 $1,460.10, down $3.10 from Monday's close.


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