International
Markets News Tuesday: French household expenditure dipped in April for second straight month; India's GDP expands 8.5% in year to March
By Finfacts Team
May 31, 2011 - 9:05 AM

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President Barack Obama greets Hugh Hills, 85, in front of his home in Joplin, Missouri, May 29, 2011. Hills hid in a closet during the tornado when the president was in Europe, and it destroyed the second floor and half the first floor of the house.

France: France's National Institute of Statistics and Economic Studies (Institut National de la Statistique et des Études Économiques: INSEE) reported today that in April, households’ expenditure in goods fell by 1.8% in volume terms, after having declined by –1.0% in March. INSEE says this dip is mainly imputable to a sharp decrease of durables - - cars in particular, and also to a decrease in energy expenditure. Food products’ consumption increased.

Irish sovereign funded to 2013: Davy economist, Conall Mac Coille, comments  - -"It is becoming something of a habit for finance minister Michael Noonan to have to clarify government fiscal policy on a Monday morning as the weekend seems to provide an opportunity for his cabinet colleagues to muddy the waters. Just as well then that speculation that the Irish sovereign may not be able to re-enter international bond markets in 2012 misses the key point that the current EU/IMF plan provides funding out to 2013.

That the sovereign is funded through 2012 became apparent in the April stability programme update by the EU, IMF and Department of Finance, when it was announced that the unused €7.5bn (of their overall €17.5 contribution) provided by the EU/IMF to meet the PCAR/PLAR capital and liquidity requirements, could now be used for sovereign funding needs. The latest EU Commission update on Ireland's economic adjustment programme shows that Ireland requires €14bn of market funding in 2013, but these funding needs could be largely met by eroding the €16.2bn (at end-2010) of cash balances available to the state.

So, the Irish sovereign is funded up to the point where the European Stability Mechanism (ESM) is due to replace the current funding arrangements from the European Financial Stability Fund (EFSF). As we argued in our research report issued on May 27th ('Irish economy and bond market — a medium-term path to debt sustainability'), key elements of the ESM funding arrangements indicate that it will be difficult for those countries that draw on ESM funding to re-engage with private markets. Indeed, the IMF has recently criticised the shortcomings of the proposed ESM framework. Nonetheless, it is crucial that the EU have a funding programme available for sovereigns within the Eurozone that face liquidity problems. Hence, policymakers should focus on ensuring that support is on the right terms to allow re-engagement with private markets."

Economic View; Further austerity on the way in Greece: Goodbody chief economist, Dermot O’Leary, comments  - - "Under intense pressure from the Troika, but with the background of mass protests in the streets of its capital, it appears that Greece is edging towards accepting further austerity measures in a bid to secure its next tranche of financing from the IMF/EU. It is reported this morning that Greece will agree to a medium-term fiscal plan that includes cuts in benefits to civil servants, an extension to a public-sector pay freeze from two to five years, a much-curtailed limit on new hiring (one for every ten that leaves) and a strict limit on its capital expenditure programme.

The sticking block continues to be the privatisation programme, particularly whether there will be an external representative on the board of the entity that will be set up to manage the sales process. It is reported that negotiations are to be wrapped up by tomorrow night. The Troika will then complete their mission by the weekend, with their report due next week. An emergency euro-zone meeting will be held on either 6 June or 13 June, while Juncker stated last night that it plans to decide its next move on Greece by the end of June.

The key issue for markets over the next four weeks is, of course, whether euro-zone policy makers will go down the road of debt restructuring/reprofiling at the same time as it agrees on a further package of support for Greece. With Greece between a rock and a hard place, it has little choice but to cede to the demands of its lenders and bow to its judgement.

Ireland learned this lesson at the end of 2010. Once a country becomes reliant on external official financiers to fund its deficits and repayments, that country has little say over systemic issues such as debt restructuring."

India Economy: Reform at the Crossroads: PK Basu, Chief Economist, Asia ex-Japan at Daiwa Institute of Research is conditionally constructive about the Indian economy as he is still concerned about the RBI being behind the curve:

Irish Airlines: Moving in the right direction, but a long term game; Goodbody's Eamonn Hughes comments - - "The European Commission yesterday released a press release in which it indicated that an additional 28m passengers could travel in the region’s airports by 2025 if they made more efficient use of landing and takeoff slots.

The report indicated that sub-optimal use of capacity at airports, inadequate slot co-ordination, lack of consistency with the Single European Sky and barriers to entry of operations were all hampering progress at a range of congested airports, highlighting that demand exceeded capacity for most or all of the day at Heathrow, Gatwick, Paris Orly, Milan Linate, Dusseldorf and Frankfurt. The relevant commissioner, Slim Kallas, indicated that he intends to bring forward legislation to tackle this issue in the autumn, a noble target.

To put it into context, 750m people used EU airports in 2009, so the potential here is shy of a 4% increase in passenger capacity. It’s meaningful, but over such an extended period will be modestly felt. Should airports get it right, it implies more through-put for less capex. For the airlines, it probably provides for additional capacity (modestly each year) at slot constrained airports, and we anticipate some benefits for the main flag carriers and the likes of easyJet, who are heavy users at slot constrained airports."

China's Power Crisis: Chi Lo, CEO of HFT Investment Management believes that the power crisis in China leads to risks such as inflation and higher energy prices:

US Markets

US markets were closed Monday for Memorial Day - - a day in honour of America's war dead.

Asia Markets

The MSCI Asia Pacific Index rose 1.0% Tuesday.

Japan's Nikkei 225 added 1.99%; China's Shanghai Composite index advanced 1.37%; Australia's S&P/ASX 200 gained 0.87% and the Bombay Stock Exchange's Sensex index climbed 1.32% in Mumbai.

Indian growth in the Q1 2011 slowed to 7.8% from a year earlier, the national statistics office reported today. In the fiscal year to March 2011, GDP increased by 8.5%, India's Central Statistical Organisation reported.

The Reserve Bank of India raised interest rates 9 times in the past 15 months to curb inflation which is currently at an annual rate at 8.6%.

Asia benchmarks

Finfacts Reports

German retail sales rose in April; Unemployment rate fell to 6.1% - - 521,000 new net jobs were added in 12 months
US has 14.3m vacant year-round homes and home ownership has dropped to 1998 levels
Quinn family say loans of €2.34bn from State-owned bank Anglo Irish Bank “unenforceable”
Japan’s manufacturing sector returned to growth in May
Markets News Afternoon: Noonan rules out second EU-IMF bailout; Germany to phase out nuclear power by 2022
Quinn says CAO system needs to be reviewed to take account of new profile of Irish third level entrants
Bruton announces 'massive overhaul' of Irish company law following Company Law Review Group report
Central Bank says its top priority is resolution of Irish banking crisis; Profit for 2010 fell to €840.9m

In Europe, the Dow Jones Stoxx 600 has risen 0.02% in early trading Monday.

The ISEQ is up 0.38% in Dublin.

CRH is off 1.33%; Elan has risen 0.60%.


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 $1.4281 and at £0.8674.

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 Friday last week, the BDI climbed 7 points or 0.48% to 1,474 - - The Baltic Exchange was closed in London on Monday.

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 July 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $101.52 per barrel, up 92 cents from Monday's close. In London, Brent for July delivery is trading on the International Commodities Exchange at $115.40. 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 $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 $1,537.10 per oz, down $2.00 from Friday ( Monday was a public holiday) close in New York.


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