Markets News Thursday: Bank deposits at ECB double; Japan tries to halt rise of yen
By Finfacts Team
Aug 4, 2011 - 7:52 AM

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Bank deposits at the European Central Bank have more than doubled to a 5-month high this week as European financial firms seek the safety of cash in response to the intensification of the Eurozone debt crisis.

The ECB said on Wednesday that on Tuesday banks put €104.9bn overnight on  deposit, the highest level since early February and up from €49.9bn on Friday. As the ECB pays below market rates, the development suggests that banks are hoarding funds rather than lending to each other.

The governing council of the ECB will meet in Frankfurt today and it's expected that interest rates will be kept on hold.

Italian and Spanish benchmark borrowing costs fell slightly on Wednesday, after both had hit euro-era record highs on Tuesday.

Silvio Berlusconi, Italy’s prime minister, in a speech to parliament, offered no new plan in response to market pressures. “The country is economically and financially solid,” he told MPs.

The Italian 10-year bond yield fell 3 basis points to 6.10%. The spread with German bunds was little changed at 372 basis points or 3.72%. The yield on 10-year Spanish bonds also fell 3 points, to 6.26%. The Spanish spread dipped 4 points to 387 basis points.

The Japanese government intervened Thursday morning in currency markets to stop the rise of the yen against the dollar, as it seeks to protect the economic rebound following the March 11 devastating earthquake and tsunami.

The yen dropped, with the dollar rising from ¥77.13 to ¥78.20 and the euro from ¥110.72 to ¥111.80. Yoshihiko Noda, Japanese finance minister, said the intervention was to counter what he calls "one-sided," "excessive" and speculator-driven rises in the yen.

On Wednesday, the Swiss National Bank reduced interest rates close to zero to slow capital inflows.

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Services PMI indicates that sector remains weak: Conall Mac Coille, chief economist at Davy, comments  -- "The Irish services PMI for July was published by Markit Economics this morning. The overall index fell slightly from 52.4 in June to 51.7 in July, remaining above the 50 'no change' level and indicating that the sector expanded in July. However, the survey also indicated that new business declined for the third consecutive month and service companies reduced employment.

The weakness of the domestic economy was evident in yesterday's Exchequer returns data. The only major tax heading behind the government's expectations was value added tax receipts, reflecting the weakness of consumer spending. However, following a 7.6% shortfall, relative to expectations, corporation tax receipts caught up with budgetary plans as payments expected earlier in the year were made in July. This means corporation tax receipts are 6.0% ahead of expectations in the first seven months of the year. So, overall, yesterday's Exchequer returns were a further sign that the government's plans for the public finances in 2011 remain on track (see our research report issued August 3rd).

The robustness of the Exchequer returns is welcome given the additional turbulence in European markets. One small bright spot yesterday was the ADP employment report in the United States, which indicated jobs growth in excess of 100,000 persons in July. However, the ADP report was a very poor guide to the final payroll number in June, so markets will be wary of reading in too much from yesterday's report. That said, if initial jobless claims released today remain below 400,000, the market may become more optimistic about the potential outcome of July's payroll numbers released on Friday."

US Markets

Leading US stocks ended an eight-day losing streak on Wednesday.

The Dow Jones Industrial Average rose 30 points, or 0.3%, to finish at 11,896. The Standard & Poor's 500-stock index gained 0.5% while the Nasdaq Composite added 0.9% after falling briefly into negative territory for 2011.

Asia Markets

The MSCI Asia Pacific Index fell 0.7% Thursday after a 2.2% slide on Wednesday.

Japan's Nikkei 225 rose 0.23%; China's Shanghai Composite index rose 0.16%; Australia's S&P/ASX 200 lost 1.30% and the Bombay Stock Exchange's Sensex index rose 0.05% in Mumbai.

Asia benchmarks

Finfacts Reports

Growth in Irish services activity slowed in July; New orders fell for a third month running
Irish pension funds decline in July
Growth in global services accelerates to four-month high in July but order inflows slow
Irish Exchequer Returns: Tax revenues end-July 1.4% above target; Debt servicing up year-on-year up €750m
US private-sector employment is estimated to have increased by 114,000 in July

In Europe, the Dow Jones Stoxx 600 rose 0.67% in early trading Thursday.

The ISEQ is up 1.42% in Dublin.

CRH has climbed by 2.90% and Elan is up 2.07%.

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The euro is trading at $1.4330 and at £0.8746.

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 rose 7 points or 0.56% to 1,260.

Crude oil for August 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $91.93 with no change from Wednesday's close. In London, Brent for August delivery is trading on the International Commodities Exchange at $113.12. 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 $21.

The US Energy department recently said that growing volumes of Canadian crude oil imported into the United States contributed to record-high storage levels at Cushing, Oklahoma of over 41m barrels at the end of March 2011 (86% of working capacity at Cushing), and a price discount for WTI compared with similar-quality world crudes such as Brent. A discount for WTI is expected to persist until transportation bottlenecks impacting the movement of mid-continent crude oil to the Gulf coast are relieved. Consequently, the projected US refiner average acquisition cost of crude oil, which was about $2.70 per barrel below WTI in 2010, is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above WTI in 2012.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,666.50 per oz, up $4.40 from Wednesday's close in New York.

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