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Markets News Afternoon: US service sector expanded in September after 11 months of falls; Irish banks may raise new capital of $17bn
By Finfacts Team
Oct 5, 2009 - 4:10:02 PM
Fishing off Timor-Leste, Asia Photo: Alex Baluyut / World Bank
The US service sector expanded in September, after 11 months of contraction.
The Institute for Supply Management reported Monday that its index of nonmanufacturing activity moved to a reading of 50.9 last month, from 48.4 in August, while its business activity/production index hit 55.1, from 51.3.
Readings over 50 indicate growth. The overall index had been expected to come in at 50.0.
Anthony Nieves, chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee; and senior vice president - - supply management for Hilton Hotels Corporation commented: "The NMI (Non-Manufacturing Index) registered 50.9% in September, 2.5 percentage points higher than the 48.4% registered in August, indicating growth in the non-manufacturing sector after 11 consecutive months of contraction. The Non-Manufacturing Business Activity Index increased 3.8% to 55.1%. This is the second consecutive month this index has reflected growth since September 2008. The New Orders Index increased 4.3% to 54.2%, and the Employment Index increased 0.8% to 44.3%. The Prices Index decreased 14.3% to 48.8% in September, indicating a significant reversal and decrease in prices paid from August. According to the NMI, five non-manufacturing industries reported growth in September. Even with the overall month-over-month growth reflected in the report this month, respondents' comments vary by industry and remain mixed about business conditions and the overall economy.
The growth in third quarter service sector activity reached its highest point in two years. “It was surprisingly strong this survey, and it’s now actually back pretty much exactly in line with its longer run averages,” Ross Walker from Royal Bank of Scotland told CNBC Monday. He doesn’t think trend rates of growth will sustain, but “it does reinforce confidence that we will not see a double dip over the next quarter or two,” he said.
This month, we asked a special question with regard to the American Recovery and Reinvestment Act (the Obama stimulus program). Fifteen of the 18 non-manufacturing industries expect to derive some benefit from the program, and 14 non-manufacturing industries responded that they expect their companies to see some benefit."
European banks
JP Morgan Securities said today that European banks may raise an additional $78 billion in capital over the next six months as they attempt to boost capital ratios towards levels proposed under the Basel II bank capital rules.
The analysts said banks appear focused on a revised minimum Core Tier 1 ratio of 8% that could lead to potential capital raising of $78 billion, of which $38 billion will be to repay government funds and $40 billion will be fresh capital.
With an expected capital need of $17 billion at Germany's Commerzbank, $10 billion at Allied Irish Banks, $7 billion at Bank of Ireland and $6 billion at France's Societe Generale, the four account for 52% of the total capital requirement seen for European banks, the analysts said.
Last month, the Group of 20 leading industrial and emerging market countries agreed in Pittsburgh to agree new capital rules by the end of 2010 and set an end-2012 date for implementing the tougher capital rules for banks.
Lehman bankruptcy
Hedge fund creditors in London of collapsed US investment bank Lehman, who have an estimated $16 billion frozen amidst the firm's bankruptcy, are set to be asked today to agree to withdraw court claims in order to progress the release of the funds.
Steven Pearson, joint administrator of Lehman Brothers International (Europe) and a partner at PricewaterhouseCoopers, said he would seek permission to remove the claims from UK courts and provide assets directly to creditors, if enough hedge funds are willing to go along with the move.
Steven Pearson said that he hopes to gain the support of 90% of creditors, which would reduce the risk that creditors who don't participate could file claims later against those who do.
The Obama administration is considering a jobs stimulus, and CNBC's John Harwood has the details.
US markets
The Dow Jones Industrial Average is up 51 points, or 0.54%, at 9,539.
The Nasdaq Composite Index gained 0.83%. The S&P 500 was up 0.76%
Goldman Sachs analysts said today that they are more optimistic about large US banks, raising their coverage view on the sector to attractive from neutral.
AIB is up 1.77% and Elan has gained 0.79% and CRH has risen 1.21%.
C&C is up 3.31%.
Ryanair October traffic statistics
The following are passenger and load factor statistics for September 2009 for Ryanair, the world’s largest international scheduled airline.
Sept 08
Sept 09
Increase
12 mth to 30 Sept 09
Passengers (m) 1
5.23M
6.12M
+17%
63.3M
Load Factor 2
84%
85%
+1%
82%
1. Represents the number of earned seats flown by Ryanair.
2. Represents the number of passengers as a proportion of the number of seats available for passengers.
Ryanair’s Stephen McNamara said: “Ryanair carried three times British Airways UK/ Europe passengers, and more than double the total number of British Airways passengers in September as millions of passengers continue to switch from high fares, frequently delayed airlines to Ryanair’s low fares, on-time flights. Ryanair continues to carry more international passengers than any other airline, making Ryanair the World’s favourite airline”.
Coughlan announces 50 new jobs
Tánaiste and Minister for Enterprise, Trade and Employment Mary Coughlan today announced that hedge fund administrator Equinoxe AIS, is to expand its Irish operation with the establishment of a new asset servicing operation in Sligo, which will employ over 50 people over three years, "with the potential for further growth as the operation develops." Supported by Government through IDA Ireland, it will initially locate at the Innovation Centre at the Institute of Technology Sligo (IT Sligo). Equinoxe’s existing Irish operation – Equinoxe AIS Ireland – located in Malahide, Co Dublin, is the company’s European Headquarters servicing the EMEA markets.
There were no official announcements on job losses today.European Benchmarks
On the New York Mercantile Exchange, oil for November delivery is trading at $68.84 down $1.11 from Friday's close. In London, Brent crude for November delivery is trading at $66.78 a barrel.
Currencies
The euro is trading at $1.4623 and at £0.9174.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
Nouriel Roubini, the New York University professor who accurately predicted the financial crisis and is popularly known as Dr. Doom, talks with Bloomberg's Francine Lacqua about the prospects for US stock and company earnings:
