The Swiss National Bank today cut its benchmark rate by 0.5% to 0.5%. It is the first European central bank to move towards zero interest rates.

In New York Wednesday, the Dow Jones Industrial Average closed up 70.09 points, or 0.8%, at 8761.42, down 34% for the year.

Dow financial components Citigroup and Bank of America fell 2.8% and 1.5% respectively. American Express dropped 7.4%.

Both the Nasdaq and S&P 500 rose 1.2%.

Barry Dixon, analyst at Irish broker Davy, comments today on the US auto bail-out deal:"Markets were relatively stable overnight as the prospects for the US auto bail-out plan improved and oil prices increased. There are continuing signs, however, that activity levels in the real economy continue to deteriorate which will have a further negative impact on earnings.

The $14bn bail-out of the US auto sector is another sign of the incoming administration's strategy of protecting/creating jobs in the US. President-elect Obama has made it clear that he will spend taxpayers' money where domestic US interests are served rather than a broader fiscal stimulus which will boost non-US economies. This strategy is also evident in the proposed infrastructure which could create up to 2m jobs.

The auto plan successfully passed through the House of Representatives, but there may be some dissent from Republicans in the Senate.

The cost of the on-going government refinancing of the economy was demonstrated yesterday with the Treasury's $28bn note auction, the latest in a series to fund the US government deficit.

The US deficit for November widened to $164.40bn, well above the $98.24bn reported for the same month one year ago.

This increased funding requirement – combined with comments from Juergen Stark, an executive member of the ECB, that the bank had limited scope for further rate reductions – led to a weakening of the dollar versus the euro.

The US plan of aggressively refinancing the economy will at some stage positively affect corporate earnings. This is the longer-term positive for the market. In the meantime, however, the recession is sill biting as the market starts to anticipate a dismal earnings season early in the New Year."

The Wall Street Journal says two new surveys show widespread pessimism among executives about the economy and their companies' prospects in 2009, with many planning to slash spending and employment in coming months.

Nearly 60% of chief financial officers say they don't expect the U.S. economy to recover before the fourth quarter of next year, and about 40% don't expect a rebound before 2010, according to a survey of 679 U.S. CFOs by Duke University's Fuqua School of Business and CFO Magazine. The survey was conducted from late November to early December.

The Journal says Duke finance professor John Graham says CFO optimism is the lowest since the university began its quarterly survey more than 12 years ago. Mr. Graham says the survey has historically been a good bellwether of company performance. He says there is a correlation between changes in CFO optimism and earnings, capital spending and employment in the following year.

Bloomberg says the global hedge-fund industry lost $64 billion of assets in November, with an index tracking its performance declining for a sixth month as economies in Asia and Europe joined the U.S. in recession, Eurekahedge Pte said.

“It's very clear that there is going to be significant consolidation in the hedge-fund industry,”said Duncan Smith, a partner in Hong Kong at Ogier, a firm that provides corporate and legal services to financial companies.“Conditions are quite difficult and that really goes without saying. Underlying liquidity is very hard for funds.”

Market declines contributed to $18 billion in net losses, while investor redemptions made up $46 billion, Singapore-based Eurekahedge said, based on preliminary figures taken from 41 percent of the funds it surveys. It said hedge-fund assets shrank by $110 billion to $1.65 trillion in October.

Asian markets rose for a fifth day Thursday and the MSCI Asia Pacific Index rose over 1%.

Australia’s S&P/ASX 200 Index fell 1.2% after the unemployment rate in November increased to 4.4% from 4.3% in the previous month.

The Nikkei 225 rose 0.7% and China's CSI 300 dipped 2.39%. India's BSE Sensex 30 Index dropped 0.4%.

Asia-Pacific - benchmarks

European stocks have fallen Thursday and the Dow Jones 600 is down 0.76%.

In Dublin, the ISEQ Index has fallen 0.89%.

Anglo Irish has risen 15% after a 25% plunge on Wednesday.

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Goodbody economist Dermot O’Leary says another sterling low puts pressure on the Irish economy:"Bailouts are all the rage these days. In Ireland, the Government drew up a deal last night, not for the banking sector, but for the pigmeat industry to get its products back on the market after its recent problems. The food industry is Ireland’s largest indigenous export industry, accounting for 8% of total merchandise exports. Despite this respite, Irish exporters are coming under increasing pressure from the continuing appreciation of the euro relative to sterling, a region that accounts for just less that 20% of Irish merchandise exports. Overnight, sterling hit a record low relative to the euro of c.88p, and has now fallen by 24% since the summer of 2007.

While larger multinational company exports such as chemicals dominate Irish exports, the fall in the sterling is not only putting pressure on Irish exporters to that region, it is a risk (from a transactional point of view) for Irish corporates who have significant operations in the UK region. Furthermore, an increasing flow of consumers to Northern Ireland to take advantage of cost savings has put additional pressures on already beleaguered retailers in the Republic of Ireland. With the UK economy having a significant current account deficit, there is a clear need for a fall in the value of sterling. The recent move, though, has mainly been led by the rather gloomy news on the current state of the UK economy and the prospect of interest rates falling close to zero. We may see this reverse somewhat in the short-term if our forecasts that the ECB will have to cut interest rates by a similar amount (to 1%) over the coming months prove correct, in an effort to deal with a faltering economy in its own region."

Goodbody analyst Eamonn Hughes comments: S&P downgrades country risk rating on Ireland: "S&P has revised down its Banking Industry Country Risk Assessment (BICRA) on Ireland (AAA/Stable/A-1+) to Group 2 from Group 1. Ireland previously resided in the highest ranked grouping and now joins countries like Germany, Italy, Spain and Norway. The downgrade reflects “the rising economic risk in Ireland” and the “challenges facing the banks’ business, capital and funding profiles, which weigh more heavily on the smaller, less diversified players”. That should hardly come as a shock to many people and, interestingly, S&P comments that the “shift to Group 2 has no direct impact on our ratings on the Irish banks, but reinforces the existing negative outlook on these ratings”. S&P comments that the government’s guarantee has addressed the short term questions around bank liquidity, but longer term pressures are now coming to the fore, which stem from the weak property market in Ireland, but also the bank’s exposure to the weakening UK economy.

The latter comment is noteworthy, so presumably there will be a similar note on the UK banks in due course, if not already. Elsewhere, S&P says it sees “some scope for consolidation in this already concentrated system, which would likely reinforce the dominant positions of the major players”. This would appear to be slightly at odds with recent commentary from the media that the government’s position is shifting to being a bit more circumspect around the consolidation angle. Finally, on credit quality, under a reasonable worst case economic scenario, S&P assesses that the level of problematic assets as a % of private sector credit would be in the range of 5-15%, the strongest category. Having said that, we would have figures of 3.3% for BOI, 4% for AIB and 5.5% for Anglo in our forecasts. We would have a more bearish outlook than the banks themselves on the outlook for credit quality, but would highlight that our forecasts would not be worst case scenario like that highlighted by S&P."

Hughes also comments on the European Commission easing of state-aid rules in revised approach to bank refinancing: "The Irish Independent headlines this morning with a story around the European Commission’s revised approach to bank re-financing. Whilst private investment in a bank may not require EU clearance, state investment would typically have to go through Brussels. However, it now appears that there would be an automatic clearing of private deals where the private investors take over 30% and any state investment is on the same terms. There does not appear to be any update on proceedings between BOI and the Mallabraca consortium, although the article speculates that Mallabraca is seeking a 40% plus stake in BOI and that the structure is not yet set and could end up being a state/private equity co-investment.

With regard to M&A activity, the revised approach indicates that a competitive tendering process should be carried out while the level of acceptable returns to the government can be lower than the customary 15% p.a. to reflect current abnormal market conditions, which is of relevance to the continuing merger talks between Irish Life and EBS, according to the report. Elsewhere, the article indicates that the government would apply an ECB formula of 7-9% plus a premium, to encourage quick repayment by the banks. Premiums would be applied to more high risk banks (in a similar vein to the bank guarantee scheme) and restrictions on dividend payments could prove unnecessary as several Irish banks have already cancelled their dividends. Whist the revisions do not purport to allow for banks to gain competitive advantage from state aid, it is clear that they do reflect an easing of state-aid rules in light of the continuing challenging market backdrop."

Davy analyst Stephen Lyons says European governments set to raise $1,000bn in 2009:"Government support for the banking sector continued yesterday, with France purchasing €10.5bn of subordinated bank securities to help bolster banking liquidity and increase lending. Government-led bank support is adding further pressures to balance sheets at a time when many are implementing fiscal stimulus programmes.

According to today's Financial Times, European governments are set to issue more than $1,000bn in 2009. This is in addition to $2,000bn expected from the US and up to $2,000bn in government-backed bank bonds. Within this context, the Irish government is expected to raise €20bn+ next year.

Yesterday saw further difficulties in bond auctions, with German government two-year bonds seeing just enough bids to meet the required fundraising. This followed difficulties on Tuesday as Austria and the Netherlands saw weak demand for their bonds. The difficulties are exacerbated by the "year-end" effect as banks and investors hoard cash on their balance sheets.

Finally, on a related matter we note that S&P dropped the Irish banking system from its top-rated group of countries. It lowered its Banking Industry Country Risk Assessment (BICRA) to Group 2 from Group 1, joining countries such as Germany, Spain, Italy and Norway. S&P says that the change reflects the rising economic risk in Ireland and the effects that this is expected to have on the banks' financial positions."