Markets News Thursday: OECD cuts Japan's 2011 economic forecast by half
By Finfacts Team
Apr 21, 2011 - 9:06 AM

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Source: OECD

US: The Dow Jones Industrial Average rose to its highest level since June 2008 on Wednesday after existing-home sales rose by more than forecast last month and encouraging earnings from Tuesday boosted technology stocks higher.

After markets closed at 4:00pm, Apple announced a stunning  fiscal 2011 second quarter, which ended March 26, 2011, with 83% revenue growth, 95% profit growth record and iPhone sales up 113%.

Apple's results and outlook pushed up its shares in after-hours trading by 3.9% to $355.69 at $342.41. The market capitalisation was $315.45bn compared with Microsoft's $216.45bn and Dell's $28.94bn.

Japan: The impact of last month's devastating quake and tsunami disaster will cut Japan's economic growth to 0.8% this year, the OECD said Thursday, halving its previous forecast of 1.7%.

However, the Paris-based think-tank for 34 mainly developed countries, said massive government and business investment in reconstruction is expected to trigger a sharp rebound in 2012, with the economy growing 2.3% up from the OECD's previous forecast of 1.3%.

The OECD said: "In addition to the usual risks related to the strength of world trade, exchange rates and commodity prices, there is great uncertainty about developments in Japan, including the duration of electricity shortages, the problems at the Fukushima nuclear plant and the size and timetable of government reconstruction spending. Consequently, the timing and strength of an economic rebound is exceptionally difficult to forecast."

Economic Survey of Japan 2011

UK retail sales expected to contract in March: Davy economist, Conall Mac Coille, comments  - - "The outlook for UK consumer spending has deteriorated as weak nominal wage growth, coupled with higher tax rates and CPI inflation, has pushed down on real incomes. Since January, the rise in the value added tax (VAT) rate by 2.5 percentage points to 20% and higher oil prices have had a large negative impact on UK consumers' spending power. Hence, measures of UK consumer confidence have declined through the second half of 2010 as consumers have realised that the negative impact of the planned fiscal consolidation was upon them. Other indicators for spending, ahead of today's retail sales data, have indicated deteriorating conditions in the retail sector.

Today's release of UK retail sales is expected to show a contraction of 0.4% on the month in March following a 1% decline in February. In January, retail sales grew by 1.1% despite the increase in VAT rates during that month. But the rise in January most likely reflected a bounce-back from the 0.5% decline in December, which most likely reflected poor weather conditions during that month. So the full impact of the slowdown in retail sales on consumer spending may not be felt until the Q2 national accounts data.

Yesterday's release by the Bank of England of the minutes of the April Monetary Policy Committee (MPC) meeting suggests that the weakness of consumer spending is pushing out the likelihood of rate increases in the near future. Most members thought that the news on the month 'had probably been to the downside.' That said, the MPC warned that CPI inflation could still rise above 5% in 2011 despite the recent decline in the headline rate to 4.0% in March from 4.4% in February. However, a rate rise in May now seems far from the certainty that the market had priced up until the recent negative news on the UK consumer."

European Peripheral Debt: Folker Hellmeyer, chief analyst at Bremer Landesbank, comments on the widening credit default swaps of Greece and Portugal:

Economic View: State considers asset sales; Goodbody economist, Juliet Tennent, comments  - -"According to the Report of the Review Group on State Assets and Liabilities, released yesterday, the NAV of the commercial State assets that it is recommending are sold is around €5bn, which the report also caveats is no more that a rough guide. As the Memorandum of Understanding between Ireland and the IMF/EU does not specify a target for asset disposals, any proceeds of such sales could be used to reduce the State’s projected gross debt position.

It would have no impact on the deficit position which would nevertheless have to be tackled and the ongoing austerity measures would still have to be implemented. The report recommends a planned programme of asset sales, as opposed to an accelerated process, thus it may be some years before any value is realized.

On our forecasts, a €5bn reduction in the State’s debt level would reduce the Debt/GDP ratio by roughly three percentage points and assuming the programme was complete by 2014, would see the ratio rise to 117%, from 101% in 2011, versus the 120% we currently forecast."

Irish Financials; Legal challenge to AIB debt restructuring; Goodbody's Colm Foley comments  - -"We note the Government’s plans to buy back some of AIB’s subordinated debt have been met with a legal challenge from two of its bondholders.

The action is in relation to the Subordinated Liability Order (SLO), which was passed last week in the high court and will amend certain debt coupon terms, maturity dates, and permit the purchase by AIB of the debt instruments. With €2.8bn of hybrid debt capital outstanding, the Finance Minister has previously said that the Government intends to 'take whatever other action is necessary to ensure appropriate burden sharing by remaining subordinated bondholders.' Of relevance to BOI, is its €2.7bn of hybrid capital, which will be central to its €4.2bn equity raise plan.

The legal challenge has the potential to hinder the burden sharing, however, there appears to be an appetite on the Government’s side to ensure this is pushed through. The motion has been adjourned until the first week in May."

Sweden: ‘The Canada of Europe’: "They’ve got good economic growth, they’ve got a good underlying export-based economy, so I don’t think we should be worried about this, but I think we should keep a good eye on it,” Tim Skeet, managing director of the Financial Institution Group at RBS, told CNBC about the Swedish economy and unemployment rate:

US Markets

In New York Wednesday, the Dow rose 187 points or 1.52% to 12,453.

The S&P 500 added 1.35% and the Nasdaq advanced 2.10%.

Asia Markets

The MSCI Asia Pacific Index gained 1.3% Thursday.

Japan's Nikkei 225 rose 0.82%; China's Shanghai composite index added 0.65%; Australia's S&P/ASX 200 Index climbed 1.13% and the Bombay Stock Exchange's Sensex index increased 0.78% in Mumbai.

Asia benchmarks

Finfacts Reports

Irish Economy 2011: The Jobs Initiative and a promised ambitious long-term strategy
Apple reports 83% revenue growth, 95% profit growth record; iPhone sales up 113% in quarter
German anti-nuclear NIMBYs now protest against green "energy autobahns"
US multinationals cut US jobs, boosted foreign jobs in past decade; Exports from America also rose
Markets News Afternoon: Dow rises to highest since June 2008 boosted by tech stocks and positive existing home sales data
McCarthy Group recommends sale of Irish State assets but not at an accelerated pace
National Consumer Agency issues latest Irish home insurance cost comparison
Bank of Ireland Seed & Early Stage Equity Fund leads €800k investment in Kilkenny-based Hybrid Energy
Irish Revenue audits resulted in collections of almost €500m in 2010

In Europe, the Dow Jones Stoxx 600 is up 0.12% in early trading Thursday.

The ISEQ has risen 1.17% in Dublin.

CRH is up 3.35%; Elan has risen by 0.17%; Grafton has climbed 2.61%.

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 $1.4620 and at £0.8867.

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 Wednesday this week, the BDI slipped 9 points or 0.71% at 1,262.

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 $111.84 per barrel, up 39 cents from Wednesday's close. In London, Brent for May delivery is trading on the International Commodities Exchange at $124.20. 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 $12.

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 $1,506.80, up $4.40 from Wednesday's close.

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