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| President Barack Obama marks his 100th day in office today. Here, the President meets with Secretary of State Hillary Clinton in the Oval Office shortly after she was confirmed and sworn in on Wednesday, Jan. 21, 2009. |
Scientists warned on Tuesday, that the swine flu outbreak that is now feared to have spread to more than 20 countries could infect four in 10 Europeans if it became a pandemic.
The "40% at risk" warning came as the first British sufferers of the condition were named as Iain and Dawn Askham, a newly married couple from Falkirk, central Scotland, who returned from honeymoon in Mexico last week.
Ryanair CEO Michael O’Leary said on Tuesday, that the swine flu outbreak is only a risk to Asians and Mexicans "living in slums".
He said travellers had little to fear from the deadly virus and predicted that a couple now being treated in Scotland for the illness after a honeymoon in Mexico was in no danger.
"It is a tragedy only for people living... in slums in Asia or Mexico," he said. "But will the honeymoon couple from Edinburgh die? No. A couple of Strepsils will do the job," he said.
The Wall Street Journal reports today consumers from the US to Europe to Japan appear to be growing more cautious amid fears that the world economy will worsen over the next 12 months, according to a report to be released Thursday. The new frugality is forcing global companies to revise their strategies and offerings.
Most consumers in a Boston Consulting Group survey of 21,800 people world-wide said they are cutting spending, searching for value and discounts, and staying home more. "Our consumers are going back to basics," said Catherine Roche, a partner at the consulting firm."They don't want to be as conspicuous as the past … avoiding visible logos on their bags and clothes."
The Journal also reports Citigroup Inc., soon to be one-third owned by the U.S. government, is asking the Treasury for permission to pay special bonuses to many key employees, according to people familiar with the matter.
The request comes as Citigroup is grappling with broad government pay restrictions that could break apart its legendary energy-trading unit. People at that unit, Phibro, are threatening to leave because of pay caps tied to the U.S. bailout of Citigroup. Phibro has been the source of hundreds of millions of dollars in profits for the bank, and has paid out hefty compensation, including a roughly $100 million windfall last year for the unit's leader, Andrew Hall.
Citigroup is looking for ways to free Phibro from the federal restrictions, including a spinoff of the unit, according to people familiar with the matter. Separately, Sumitomo Mitsui Financial Group and Citigroup reached a deal in which the Japanese bank will acquire a large chunk of Citigroup's operations in Japan.
Bloomberg reports at least six of the 19 largest U.S. banks require additional capital, according to preliminary results of government stress tests, people briefed on the matter said.
While some of the lenders may need extra cash injections from the government, most of the capital is likely to come from converting preferred shares to common equity, the people said. The Federal Reserve is now hearing appeals from banks, including Citigroup Inc. and Bank of America Corp., that regulators have determined need more of a cushion against losses, they added.
300 weakest links are likely to fuel higher corporate bond default rates says Standard & Poor's : Standard & Poor's, the US ratings agency, said on Tuesday, that the number of global weakest links increased to a record high of 300 as of April 22, 2009, as eroding credit quality leads to lower ratings and more entities with negative outlooks on corporate bonds or with ratings on CreditWatch with negative implications.
This is the 14th consecutive month that has seen an increase in weakest links. The 300 weakest links have combined rated debt worth $485.75 billion.
By sector, media and entertainment, retail and restaurants, and forest products and building materials were the most vulnerable, with the highest concentrations of weakest links. These are defined as issuers rated 'B-' or lower with either a negative outlook or with ratings on CreditWatch negative, and they are at greater risk of default.
Corporate defaults continue to rise rapidly in 2009. Through April 22, 2009, 92 issuers defaulted, affecting debt worth $243.95 billion. By comparison, 126 defaults were recorded in all of 2008, affecting debt worth $433 billion.
The 12-month-trailing global corporate speculative-grade bond default rate increased to 4.92% in March 2009 from 4.28% in February and is now more than 6x the 25-year low of 0.79% recorded in November 2007. The US speculative-grade corporate default rate increased for the 16th consecutive month, reaching 5.42% in March 2009, up from 4.9% in February and now about 5.5x the level from year-end 2007.
"We expect the US corporate speculative-grade default rate to continue rising to an all-time high of 14.3% by March 2010,"said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "Historically, defaults have continued to escalate even after signs of economic recovery," said Ms. Vazza. "This cycle will be no different. We expect the economy to bottom out in the third quarter of 2009, but defaults likely will be abundant past that time horizon."
The Dow Jones Industrial Average fell 8.05 points, or 0.1%, to 8016.95 on Tuesday.
After an initial fall, the market was boosted by a bigger-than-expected rise in consumer confidence. The Conference Board said that its sentiment index rose to 39.2 in April from a revised reading of 26.9 in March.
The technology-dominant Nasdaq Composite Index fell 0.3% as did the S&P 500.
Japan was closed for a public holiday Wednesday.
The MSCI Asia Pacific excluding Japan Index rose 2.9%.
Asia-Pacific -benchmarks
British/Dutch oil group Shell said today that its net profit fell by 62% in the first quarter of 2009 to $3.488 billion, with production down due to the weak economic climate.
The German industrial giant Siemens today lowered its full-year operating profit forecast by 17.5% and also presented strong quarterly results.
Siemens said it expected a full-year operating profit of more than €6.6 billion in core activities, compared with a previous forecast of more than eight billion euros.
The group's "Total Sectors" report presented operating profit and sales for the second quarter of Siemens' fiscal year, which begins on October 1st.
Siemens has reorganised its activities into three main sectors, energy, healthcare and industry.
Overall operating profit for the three month period to March jumped 43% to €1.8 billion while sales rose by five percent to €18.95 billion, exceeding market expectations.
Net profit surged 146% to €1.01 billion from the second quarter of its previous fiscal year, which had been reduced by exceptional items.
The share price is up 3.4% in Frankfurt.
In Europe, the Dow Jones Stoxx 600 is up 0.65%.
In Dublin, the ISEQ is up 2.4%.
Elan has risen 6% and CRH is up 1.5%.
European Benchmarks
Irish Share Prices
Euribor Rates
AIB Daily Report
Bank of Ireland Daily Report
Currencies
The euro is trading at $1.3194 and at £0.8960.
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
Crude oil for June delivery is currently trading on the New York Mercantile Exchange (Nymex) at $50.23 per barrel up 31 cents from Tuesday's close. In London, Brent for June delivery is trading on the International Commodities Exchange at $50.35 up 36 cents.
Gold spot price
Gold is trading at $896.20 up $1.90 from Tuesday's spot price close in New York.
Davy economist Rossa White comments: Rapid adjustment in Irish commercial property market - - "The latest research report from CB Richard Ellis (CBRE) outlines the rapid adjustment in the Dublin commercial property market over the last year. Activity came to a virtual standstill in Q1. The problem of the undercapitalised banking sector must have played a huge part, burdened as it is by troubled legacy loans. The stamp duty change did little to stir overseas interest and was somewhat irrelevant against the ugly global backdrop (it needed to be cut to 0% rather than to 6% anyhow). We find it hard to see property market conditions getting any worse than in Q1, but activity is likely to remain weak throughout 2009.
There are a number of key data points to note. The data on yields from CBRE are consistent with the IPD data. But Q1 figures are not available from IPD, which amalgamates the numbers from all the main commercial agents. So the CBRE figures are timely. Office yields in Dublin were 4% a year ago. They are now 7.5%. Rents probably dropped a touch over that 12-month period, suggesting that prices have fallen 50%. Meanwhile, the vacancy rate hit 16.3% in January-March, up from 11.4% in Q1 2008. Investment activity was a pitiful €600,000 (no typo!).
But prices have dropped a long way already, so the yield adjustment is more than half-way there. Valuation has improved hugely. The current yield of 7.5% equates to a near five percentage point premium over prevailing swap rates. The problem is that bank margins have widened to account for more than half of that gap. Moreover, the supply of credit may be pretty inelastic to its price. There is one further caveat: that rents don't slip much further. Unfortunately, the vacancy rate may not settle for at least a year – following the bottom in the economy. Rents will remain under pressure until then."
Goodbody economist Deirdre Ryan comments: A 2010 recovery for Ireland not likely - - "With global economic forecasts having taken a hammering of late, Ireland has been no exception as near term projections for the Irish economy continue to ratchet downwards. The ESRI, in their Quarterly Economic Commentary, released this morning is the latest to downgrade forecasts for the Irish economy, with GDP now expected to decline -8.3% in 2009 in their view (-9.2% GNP). However, despite the severe contraction occurring this year, they see the pace of activity ‘rebounding’ to a much more subdued rate of decline in 2010 of -1.1% in GDP terms (-1.2% GNP).
While we would not disagree with its 2009 forecast, (we expect GNP to fall by 9.5% this year), we would, however, have reservations that such an improvement would occur in 2010, where we see an additional 4.9% contraction in GNP. Within the forecasts, the main divergence lies in relation to the consumer spending projections, where we expect a 6.5% decline in spending in 2010 after a 9% decline this year, which compares to the ESRI’s expectation of a 3% fall in spending next year (-7% for 2009).
Given the extensive falls in employment that will occur both this year and next, where employment is expected to fall on average by c.165,000 this year and c.96,000 next year on our forecasts, (which are in total 30,000 lower than the employment declines expected by the ESRI over the same period) we find it difficult to envisage such an outturn for consumer spending. The trends in the year to date have shown a rapid retrenchment in spending patterns, with consumers choosing to increase their rate of savings and we see little reason for this trend to abate any time soon. Worryingly, the ESRI forecasts look optimistic!"
Goodbody analyst Marina Houghton comments: IATA reveals accelerating pace of decline in passenger volumes in March - - "The IATA reported international traffic statistics for March yesterday, revealing an acceleration in the pace of decline in passenger volumes across all regions bar the Middle East. Overall passenger volumes fell 11.1% yoy in March (from -10.1% yoy in February and -5.6% yoy in January) as capacity was reduced by -4.4% yoy in the period (versus -5.9% in February and -2.0% in January) which resulted in a 2.2% improvement in overall load factors to 72.1% (from 69.9% in February and 72.8% in January). Load factors on average are now 5.4 percentage points lower than they were in March 2008.
The IATA estimates that the shift in Easter from March to April negatively distorts passenger numbers by approximately 2%, so the underlying movement in passenger numbers is -9% overall. In Europe, the downward trend also accelerated as passenger volumes fell 11.6% yoy in March (versus -10.1% yoy in February and -5.7% yoy in January). Capacity cuts, however, eased marginally for the first time since November 2008 to -4.4% yoy (versus -5.9% in February and -2% in January). Load factors improved in the region by 1.9% to 72.1% (versus 70.2% in February and 71.3% in January). Europe saw capacity taken out of the system a little quicker than the US and as a result capacity cuts eased more in March in Europe.
Passenger volumes in the US continued to deteriorate with a drop of 13.4% yoy in March (versus -12% yoy in February and -6.2% in January), however load factors did increase 6% to 76.2% in March, from 70.2% in February. Concerns over Swine Influenza could have a significant impact on traffic however, the IATA’s Director General and CEO, Giovanni Bisignani, commented that it is “still too early to judge what the impact of Swine Flu will have on the bottom line”.
He also noted the UK Chancellor’s plans to increase UK Air Passenger Duty which he viewed as “shockingly disappointing” at a time when the government should be trying to stimulate demand and pointed to the example in the Netherlands where increased tax revenues from departure taxes raised €312m at a cost of €1.2bn in lost revenue, leading the Dutch government to abolish the tax. In light of the imposition of a €10 tax from Dublin airport, we have yet to see what the impact on passenger numbers will be. Further colour on passenger volumes in April will begin to emerge next week when the individual airlines announce their April traffic stats."
