See Search Box
lower down this column for searches of Finfacts news pages. Where there may be
the odd special character missing from an older page, it's a problem that
developed when Interactive Tools upgraded to a new content management system.
Welcome
Finfacts is Ireland's leading business information site and
you are in its business news section.
We
provide access to live business television and business
related videos from: Bloomberg TV; The Wall Street Journal;
CNBC and the Financial Times. Click image:
Markets News Monday: Aer Lingus traffic up in July; WorldSpreads sells Irish unit; Japanese machinery orders rise
By Finfacts Team
Aug 10, 2009 - 9:06:25 AM
Aer Lingus today announced traffic statistics for the month of July 2009 and said total passenger numbers in July 2009 were 1,117,000, an increase of 8.2% compared to July 2008. Short haul passengers were 1,004,000, an 11.2% increase on July 2008 and long haul passengers were 113,000, a 12.4% decrease on July 2008.
Aer Lingus' overall load factor in the month was 82.3%, a decrease of 1.0 points compared to July 2008, with capacity increasing by 1.5%. Short haul load factor was 85.6%, an increase of 0.4 points on 2008, with capacity increasing by 12.8%. Long haul load factor was 77.0%, a decrease of 4.0 points on 2008, with capacity decreasing by 12.7%.
WorldSpreads
WorldSpreads Group plc, today announced that it has entered into an agreement relating to the sale of its Irish spreadbetting business to its management.
The consideration for the Disposal is approximately €9.9 million in cash (€3.225 million of which is deferred) together with the proceeds from the placing of 1,885,579 existing WorldSpreads ordinary shares currently owned by members of the management of the Irish operation.
Providence
Providence Resources plc, the oil and gas exploration and production company, today announced that Italian oil and gas giant Eni has farmed into Frontier Exploration Licence 3/04 known as Dunquin.
Under the terms of the farm-in agreement, Eni will assume a 40% interest in the Dunquin licence with ExxonMobil Exploration and Production Ireland (Offshore) Limited holding a 40% operated stake, whilst Providence and Sosina will retain 16% and 4% equity positions, respectively.
Additionally, ExxonMobil Exploration and Production Ireland (Offshore) Limited, Providence and Sosina have agreed to assume a cumulative 40% interest in the adjacent Eni operated Frontier Exploration Licence 1/99 (FEL 1/99), with the equity split 36%, 3.2% and 0.8%, respectively among the companies. FEL 1/99 covers a total of 6 offshore blocks (c. 1,500 sq kilometres).
US labour data
Davy chief economist Rossa White comments: US labour market data positive all round - - "Friday's US labour market data were overwhelmingly positive. Non-farm payroll employment fell by the least since last August. And the unemployment rate actually fell (albeit mainly due to a sharp drop in the labour force). Average hourly earnings also increased by more than the market expected. It is confirmation that the US economy began to improve significantly from March or April onwards: that improvement has hit the labour market with a lag. It will reinforce the rally in risky assets.
The market was certainly surprised by the size of the fall in payrolls. The Bloomberg consensus number was for a decline of 325,000; it came in at -247,000. That was the smallest drop since August of last year. Meanwhile, the unemployment rate — taken from the separate household survey — slipped to 9.4% from 9.5%. The market had expected 9.6%. Employment in that survey fell by only 155,000 — much lower than the 462,000 average decline over the previous 12 months (as a smaller survey, the numbers are more volatile). But it was the sharp 422,000 slide in the labour force compared with June that caused the unemployment rate to decline.
Recent data suggest that US economic activity has probably bottomed. As a result, the unemployment rate is likely to peak below 10% in the next six months. It has only breached 10% on one occasion since 1950. That was in the second half of 1982, following a double-dip recession. This time around the probability of a double-dip decline in GDP is receding as the recovery in financial markets begins to feed back into the real economy."
US recovery
A Wall Street Journal report says, according to the Federal Reserve, total household indebtedness peaked at the end of 2007 at 132% of disposable income. That was by far the highest level since at least the end of World War II, nearly quadruple the 36% of 1952. By the end of March, with families boosting savings, repaying debt and defaulting, the ratio had fallen to 124%, a tad lower but still miles from the level of, say, 69% in the middle of 1985.
Consumer spending today accounts for two-thirds or more of economic output. But as they boost savings and cut borrowing, consumers can't be the drivers of economic growth that they were at the end of other recent recessions.
Consumer borrowing fell in June for the fifth consecutive month. The savings rate, which had fallen below zero in 2005 as a profligate nation spent more than it earned, was back to 6.9% of disposable income in May. It pulled back to 4.6% in June, but as people struggle to repay debt, many economists expect the savings rate gradually to return to the 7% to 10% range of the post-war years.
Japan machinery orders
Japanese machinery orders rose for the first time in four months in June and the current-account surplus widened, in the latest signals that the economy's worst postwar recession is easing.
Orders rose 9.7% from May, the Cabinet Office said today.
The surplus more than doubled from a year earlier to ¥1.15 trillion yen ($11.8 billion), expanding for the first time since February 2008 as exports rose.
Indonesia
Bloomberg reports that Indonesia’s economy grew at the fastest pace in Southeast Asia as higher commodity prices boosted rural incomes and a strife-free presidential election buoyed consumer spending and investment.
Gross domestic product expanded 4 percent in the second quarter compared with a 4.4% gain in the previous three months, the Central Statistics Bureau said.
Asia markets
The MSCI Asia Pacific Index climbed 1% today.
Markets reacted to Japan's machinery orders and Friday's US jobs report.
Toyota, which gets 31% of its revenue from North America, gained 2%.
The Nikkei added 1%; the Shanghai Composite lost 0.34% and India's BSE Sensex 30 rose 0.34%.
The pan-European Dow Jones Stoxx 600 dipped 0.31% Monday.
Bloomberg reports Friends Provident Plc, the 177-year- old U.K. life insurer, said it entered discussions with Resolution Ltd. after receiving a revised offer that values the company at £1.86 billion .
Resolution, the buyout company founded by insurance entrepreneur Clive Cowdery, offered 0.9 of a share for each Friends Provident share, the insurer said in a statement today. The offer includes a partial cash alternative of as much £500 million, Friends Provident said. The bid is 12 percent more than Friday’s closing price of Friends Provident.
Cowdery is making his third attempt to buy the insurer in the past month after having earlier offers turned down. The former head of General Electric Co.’s European insurance arm is using £600 million raised from a December initial public offering to buy fund managers and insurers.
In Dublin, the ISEQ is up 0.23%.
Geencore, in which embattled developer Liam Carroll, has a stake of almost 30%, fell 4%; Aer Lingus rose 1% as did Ryanair.
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, tumbled 4.6% to 2,772 points last Friday, according to the Baltic Exchange. That took its weekly drop to 17% - - the most since the end of October.
Gold is trading at $956.00 up 60 cents from Friday's spot price close in New York.
Goodbody economist Deirdre Ryan comments: "As we have highlighted previously policy decisions made in the coming months will have an overriding effect on the path taken by the Irish economy in the years ahead. While the setting up of NAMA is one of the key milestones in the economic calendar, the importance of Budget 2010 also cannot be understated. In this light, press reports over the weekend carry the news that total spending cuts in the upcoming Budget will amount to €3bn for 2010, double the €1.5bn that was set out in the Supplementary Budget last April, with the cuts to reflect some of the recommendations published in the report from ‘An Bord Snip’, released last month.
Additional reports this morning suggest that a third of the spending cuts will come from the area of social welfare. Given that the April Budget had seen the Government target a General Government deficit of -10.75% of GDP for next year, a target which looks highly unlikely to be achieved without additional measures taken, the increased focus on adjusting spending levels is likely in an effort to meet the earlier projection (we estimate a General Government deficit of -14% of GDP for next year). Nevertheless, this increased focus on spending adjustment is very much welcome given that budgetary consolidations that place a larger focus on reducing spending rather than increased taxation tend to fare more successfully.
Furthermore, with the concern over the Irish public finances having eased significantly over recent months, as seen through the much reduced level of the Irish CDS spread (down c.250bps from the peak) along with lower yield spreads on recent bond issuances, any additional measures taken to stabilise the public finances can only reap further rewards in this regard. There is little to be gained from delaying the inevitable in our view."
Goodbody analyst Eamonn Hughes comments: Capital raisings on the radar in the banking sector - - "The bulk of the UK and Irish bank results season is over and the market has generally reacted favourably to commentary that the credit cycle peak may have passed (Lloyds), though the RBS results on Friday brought a bit more perspective on the long, hard road ahead. Over the weekend, press reports indicate that the new Lloyds TSB chairman is keen to raise between £15-25bn in equity to reduce LTSB’s exposure to the UK government and the Asset Protection Scheme. It plans to reduce the amount of assets it puts into the APS by half, which may indicate that it has more confidence over the level of losses these loans could incur. This amount would equate to 50-80% of the bank’s current core Tier 1 capital ratio and something similar to its market capitalisation. While investors may welcome a chance for the bank to reduce its exposure to the State, the amount managed is certainly a substantial chunk of its existing equity.
The revelations will keep the debate on bank capital requirements on the table and while assumptions about what the capital ratios of the Irish banks will look like the far side of the NAMA haircut are still a debatable point, we believe this still doesn’t get round the fact that longer term, capital ratios are going to have to be substantially higher than current levels. Regulators are acutely aware of hampering recovery by putting higher capital targets into place quickly, so they will likely be phased in over time. However, note our current credit assumptions require both of the main banks to have to raise equity to keep the core equity ratio no lower than 4% out to end 2011.
Our clean TNAV (total net asset value) forecasts adjust for this equity issuance, but it also means the implied multiple of pre-provision profit the banks are trading on must also be adjusted (the current market capitalisation is adjusted upwards). However, a 4% core equity ratio at the bottom is still far too light and future profits will be partially digested by loan growth. So further capital raisings are in store just to get capital ratios up to more appropriate levels. So the pre-provision profit multiple you see now is not strictly the real underlying one. Presumably, more commentary on capital raisings elsewhere will keep this topic on the radar domestically."
