Markets News: IMF expects Japan's economy to contract in 2011; Aer Lingus May traffic up - - comparison distorted by May 2010 volcanic ash disruption
By Finfacts Team
Jun 8, 2011 - 8:53 AM

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Chancellor Angela Merkel of Germany greets Secretary of State Hillary Rodham Clinton, while President Barack Obama and First Lady Michelle Obama talk with Vice President Joe Biden, during the State Arrival Ceremony on the South Lawn of the White House, June 7, 2011. German Finance Minister Wolfgang Schäuble, is seated on the left, June 07, 2011.

Japan: The IMF said today that Japan’s economy continues to face headwinds from the March earthquake but should start to recover strongly in the second half of the year.

The initial shock of the disaster was severe, but swift and decisive action by the government and the Bank of Japan helped to limit its impact on the economy. Starting in the summer, the Fund in its regular country assessment said economic activity is expected to bounce back as supply constraints ease and reconstruction spending accelerates.

The recovery is projected to continue in 2012, supported by exports and continued public spending. On this basis, the IMF expects GDP growth to rise from minus 0.7% this year to 2.9% in 2012 with headline inflation remaining around zero percent in both years.

Aer Lingus: The former State airline today reported an increase in passenger numbers in May compared with the same month last year, though the figures were distorted by last year's disruption to flights caused by volcanic ash from Iceland.

Aer Lingus' total booked passenger numbers in May 2011 were 911,000, an increase of 4.0% compared to May 2010. Short haul booked passengers were 832,000, a 4.4% increase on May 2010 while long haul booked passengers in May 2011 were 79,000 equal to May 2010.

Aer Lingus' booked load factor in May 2011 decreased by 4.7 points on May 2010 to 74.6%. Short haul booked load factor was 75.1%, a dip of 4.9 points on May 2010, with capacity increasing by 10.6% due to the impact of the ash clouds in May 2010. Long haul booked load factor was 73.6%, a decrease of 4.3 points on May 2010, with capacity increasing by 6.6% due to the impact of the ash clouds in May 2010.  Booked load factor in May 2010 was inflated by customers disrupted due to the ash cloud, re-booking their flights multiple times.

Aer Lingus regional's total booked passenger numbers in May 2011 were 69,000, an increase of 86.5% compared to May 2010.

Economic View 1:  Germany and ECB on a collision course; Goodbody's chief economist, Dermot O’Leary, comments  -- "Despite rising confidence that a deal can be agreed in relation to further aid for Greece, we have been warning not to become too complacent. The latest hurdle – and it is a big one – comes from Germany, where a leaked letter from German Finance Minister Schauble to ECB President Trichet pushes for a 'substantial and quantifiable' private sector contribution.

The letter suggests that investors should be made wait an additional seven years for payment. Importantly, the private sector involvement seems to go beyond the “Vienna Initiative” style that seems to be palatable to the ECB, thus setting up a new showdown between the two most powerful factions in the euro-zone. Another major hurdle that has to be crossed is the political situation in Greece which continues to be frayed with a real risk of a referendum on the privatisation and fiscal consolidation measures and a smaller but not negligible risk of a general election being called.

We know from past experience - the 'Deauville Declaration' being the major one – that statements such as those contained in the Schauble letter can have serious implications for the markets. One wonders why such an approach to private sector involvement was not taken in the case of the Irish banking system since the arrival of the EU/IMF last December."

Chancellor Angela Merkel of Germany greets Secretary of State Hillary Rodham Clinton, while President Barack Obama and First Lady Michelle Obama talk with Vice President Joe Biden, during the State Arrival Ceremony on the South Lawn of the White House, June 7, 2011. German Finance Minister Wolfgang Schäuble, is seated on the left, June 07, 2011.

Goldman's O'Neill on Global Economy: Jim O'Neill, Goldman Sachs chairman with prospective on the global economy and Fed chief Bernanke's speech:

Economic View 2: Irish residential prices now down 40% from peak; Dermot O'Leary added - - "There was a time when house price movements were big news, but after over four years of declines, it has slightly lost its relevance. Nevertheless, from the point of view of further losses in the banking system in particular and also for the balance sheets of households, the topic is still an important one.

In April, prices continued to fall across the board, with a 1% mom decline recorded nationally (-1.7% in March). This leaves the annual rate of decline at -12%. There were similar monthly declines for houses and apartments across the country, although the annual rate of decline in the price of apartments (-15%) continues to exceed that of houses (-12%).

Residential property prices in Ireland have now fallen by 40% from peak 2007 levels, but there is a significant difference in the scale of declines between houses and apartments and by geographical area. House prices nationally have fallen by 38%, but there is a large difference between houses in Dublin (-46%) and outside Dublin (-36%). Apartment prices have fallen by 53% in Dublin and by 51% across the country. Given these differences, we have been of the view for some time that the Irish market should be analysed on a regional basis. On the evidence thus far and the fact that there is still a surplus of properties available outside of Dublin, residential prices outside the capital have further to fall.

Using the Permanent TSB/ESRI data we can extrapolate that the national average house price is now €180K which is back to levels last seen in early 2002. We estimate this is c.5 times average earnings, which is in line with levels last seen in 1998. It is clear that an unprecedented correction has taken place, but until the banking sector shows real signs of rehabilitation, facilitated by the restructuring efforts currently ongoing, there is little reason to believe that prices will rise."

Christine Lagarde Talks Up 'Experience': "It is time for those that have actually had the experience of going through the crisis to volunteer and be prepared to serve larger interests, a bigger community and the purpose of the fund at large and that's really what I'm about," French finance minister Christine Lagarde told CNBC's Indian partner CNBCTV18 in an interview on her IMF candidacy:

OPEC meeting today could lead to agreement on increase in oil production: Davy economist, Conall Mac Coille, comments - - "The Organisation of Petroleum Exporting Countries (OPEC) meets today in Vienna. Ahead of the meeting, speculation has mounted that OPEC will raise its official target for crude oil production or reach an informal agreement among the Gulf states to raise output by 1.5m barrels per day (mbd) compared with average global production of 87.5mbd in April, of which 34.5mbd was accounted for by OPEC states. Current OPEC spare capacity is in excess of 4mbd – so, if agreed, an increase in oil production could be implemented quite rapidly.

In the past, OPEC has responded to signals that the global economy is slowing by raising its quotas so as to put downward pressure on oil prices and sustain global oil demand. The slew of macroeconomic data, particularly US non-farm payrolls growth of just 54,000 in May, seems to indicate that global economic activity has softened considerably in the second quarter. Indeed, the last time OPEC agreed an increase in oil production was in September 2007, citing concerns that the slowing global economy might reduce oil demand.

Furthermore, OPEC production has declined by 1.5mbd since February as output in Libya has fallen to zero following the rebellion against leader Muammar Gaddafi. Political instability in the Middle East has often played a role in driving the risk premium on global oil prices and in affecting actual supply.

However, in the past Saudi Arabia has often been quick to increase output to smooth the reaction of the oil market to potentially disruptive events. For example, in the month of the last US invasion of Iraq, global oil production actually rose because of the increase in Saudi output. This time around, the political dynamics have led OPEC members to offer a less timely response to the oil market disruption from the fighting to displace Muammar Gaddafi. That said, even an informal agreement to raise output today could have a material impact on oil prices, which remain close to $115 per barrel."

US Markets

On Tuesday in New York, the Dow fell 19 points or 0.16% to 12, 071, after a speech by Fed chairman Ben Bernanke dampened sentiment - - see link to story in Box below.

The S&P500 slid 0.10% and the Nasdaq slipped 0.04%.

Asia Markets

The MSCI Asia Pacific Index fell 0.3% Wednesday.

Japan's Nikkei 225 rose 0.07%; China's Shanghai Composite index added 0.23%; Australia's S&P/ASX 200 declined 0.65% and the Bombay Stock Exchange's Sensex index dropped 0.22% in Mumbai.

Asia benchmarks

Finfacts Reports

German exports fell 5.5% in month of April; Imports dipped 2.5%
US Economy: Bernanke sees improvement later this year; Paper says high level of financial illiteracy among most Americans
World food prices to remain high; Food Price Index 37% above May 2010 level; Global food import bill is up 21%
Global Economic Prospects: World Bank predicts GDP in developing countries at 6.3% in 2011; High-income countries will slow to 2.2%
Irish Residential Property Prices fell by 12.2% in the year to April; Dublin apartments down 53% since Feb 2007
Dell announces Dublin as site for company’s first Cloud R&D Centre; Limerick to be site of first Dell Solution Centre
Olivia Lum of Singapore is World Entrepreneur of the Year 2011; First woman to win in 11th year of Ernst & Young competition
Eurozone retail sales volume up 0.9% in month of April

In Europe, the Dow Jones Stoxx 600 has dipped 0.29% in early trading Wednesday.

The ISEQ is down 0.14% in Dublin.

CRH is off 0.63%; Elan is up 1.95%.

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 $1.4678 and at £0.8938.

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 Tuesday this week, the BDI fell 28 points or 1.88% to 1,456.

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 $98.61 per barrel, down 48 cents from Tuesday's close. In London, Brent for July delivery is trading on the International Commodities Exchange at $116.38. 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 $17.

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 $1,538.90 per oz, down $6.80 from Tuesday's close in New York.

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