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President Barack Obama on the Great Wall of China, Nov 18, 2009.
Obama and China
Bloomberg reports President Barack Obama told Chinese leaders this week the U.S. expects to see progress by next year on making the yuan’s exchange rate “more flexible,” Ambassador Jon Huntsman said.
Obama in meetings in Beijing with President Hu Jintao and Premier Wen Jiabao said the U.S. wants progress on issues including the exchange rate by next summer, when talks between the U.S. State and Treasury secretaries and their Chinese counterparts are scheduled in the city, Huntsman said in an interview with Bloomberg Television.
“Between now and the next strategic and economic dialogue meeting we’ll want to see additional progress in a range of the issues that are part of getting the balance right in the U.S.- China economic relationship,” Huntsman said in Beijing.
The former Republican governor of Utah, once lived in Taiwan as a Mormon missionary, mastering Mandarin while there.
Global recovery takes hold -- Double-dip unlikely
Simon Barry, chief economist of Ulster Bank in the latest Focus on Markets report, says to be confident about the sustainability of the recovery, it will be necessary to see signs of a broadening out of economic improvement beyond areas boosted by transitory but important influences such as stock-rebuilding and policy stimulus. We take some early encouragement in this regard from developments in the US where indications of broad-based improvement have lately become evident.
Barry says a a key issue in the debate about sustainability is what will happen to labour markets. In this respect it is vital that the expected increases in output in the quarters ahead translate into an end to worker layoffs and a resumption of hiring. Increased employment is vital to sustained recovery as without it consumer spending prospects will lack the key and fundamental support from rising incomes. For this reason, indicators on labour markets, especially in the US, will be critical in shaping perceptions of recovery in the months ahead.
He says the recovery does face important headwinds including from ongoing strains in bank balance sheets, and the likelihood of further rises in savings rates in the US and UK as households take stock of the significant hit to wealth over the downturn. And elevated (and still rising) unemployment rates highlight both the risks to sustained increases in consumption as well as the large amounts of spare capacity which have built up as a result of the sharp contraction in output.
John Bruton, former Irish Prime Minister and former EU Ambassador to the US, told CNBC he would accept the position of President of the European Union if he was selected. Bruton also discussed what he thinks the role should cover:
Aer Lingus
Aer Lingus said in a statement Wednesday evening, that in the event that the required €97million in cost savings, the former Irish State airline is currently seeking, it will proceed to implement an alternative means of delivering the savings within the same timeframe set out under the plan.
These alternative means will include further reductions in capacity resulting from an uneconomic cost base, which in turn will lead to additional redundancies beyond those included in the plan.
Goodbody analyst Marina Houghton commented:"It is vital that Aer Lingus secures the full targeted costs savings in order to address the cost base into the winter season and the new fiscal year and regain some competitiveness in an ever more challenging operating environment. As such, we view this tough stance as a positive for the company and believe the next two weeks will be crucial in securing the future of the airline. We note the potential increases in the Irish air navigation fees and airport charges will do nothing, but hinder this process even further, should they be approved. Our models currently have the full savings modelled into them."
Inflation, what inflation?
Davy's Barry Dixon says in a commentary today: "Comments by the St. Louis Fed president James Bullard that interest rates may not rise until early 2012 were met with concerns in the bond market that inflation could accelerate.
The headline CPI in the US did nothing to help this view, rising by 0.3% month-on-month (mom), leaving the year-on-year (yoy) rate still in negative territory at -0.2%. Core inflation increased by 0.2% mom, bringing the yoy rate to 1.7%. However, this included a sharp increase in the price of new and used cars. Excluding these, core prices were weaker, particularly the services components, clothing prices and medical costs.
It is clear that over the coming months, rising energy and commodity prices will drive the headline rate of inflation higher. This however belies the fact that underlying inflation rates are likely to continue to fall driven by significant spare capacity in the economy.
On the face of it, one might believe that central banks could or should raise rates to control inflation. However, if rising commodity prices are not matched by sustained economic recovery, increasing rates may be premature, particularly where growth is fragile.
Given the high, and rising, rates of unemployment in the US and Europe, any threat to recovery must be considered seriously. This is why we believe that rates are likely to remain low for longer, a positive for global equity markets."
US markets
US home construction fell sharply in October, wiping out the gains of recent months as uncertainty over renewal of a tax credit for first-time house buyers prompted caution among builders. Meanwhile, US consumer prices rose at a moderate pace in October - - see link to report in Box below.
In New York Wednesday, the Dow Jones fell 11 points to 10,426.
The Nasdaq dipped 0.48% and the S&P 500 dropped 0.05%.
There is no greater source of untapped internal demand than China, says Stephen Roach, Asia chairman at Morgan Stanley. He speaks to CNBC's Martin Soong about Chinese consumers.
Asia
The MSCI Asia Pacific Index fell for a third day, dropping 0.7% Thursday.
The Nikkei 225 fell 1.32%; the Shanghai Composite rose 0.53% and Australia's S&P/ASX 200 gained 0.22%.
In Europe, the Dow Jones Stoxx 600 is down 0.2% Thursday.
The ISEQ is up 0.1% in Dublin.
Datalex has dipped 13% - - see report below.
FBD is up 4.7% after issuing a trading update this morning - - see link to report in Box above.
Datalex
Goodbody's Gerry Hennigan commented on today's issue of an Interim Management Statement: "Even allowing for the expected negative implications arising from the dispute with Flight Centre, as highlighted in our commentary on November 6th, the IMS released this morning for the three months to September is still a disappointment. The sole positive is that transaction revenue continues to grow (up 22% YoY in Q3 and 33% year-to-date), though at a run-rate of $10.4m, it too is on trend to fall shy of our estimate for the year of $14.1m by c.5%. The Flight Centre impact (c.$2.2m in unpaid service revenue and the previously anticipated pull-through of transaction revenue in 2010) are clearly having an impact.
Revenue for Q3 is down 19% YoY and 14% year to date suggesting a full year outcome closer to c.$29m as opposed to our forecast of $33m. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) for the current year is guided at $1.5m resulting in a net loss in the region of $3.0m compared to our expectations of EBITDA of $4.2m and a net loss of $0.7m. Notwithstanding the largely unforeseen circumstances surrounding the Flight Centre suit, the difficult trading conditions within Datalex’s customer base (airlines) is also apparent in a net cash position at the end of September of $8.5m (equivalent to $0.12 or €0.08 per share), down from $11.1m in June. The immediate emphasis is on cost reduction as Datalex seeks to reverse the trend in the net cash balance. As stated previously, until confidence returns that the cash balance can reverse the recent trend and increase, the share price will remain under pressure."
The BDI slid 41% in the third quarter and rose 40% in October.
Strong Chinese demand is continuing to power the demand for ships.
The index hit a new 2009 high on Wednesday, rising 262 points or 6% to 4,643. It was the 15th straight day of rises.
Urs Dur, vice president and logistics analyst at Lazard Capital Markets, on CNBC discussed the index's significance and what investors should expect going forward:
Goodbody chief economist: Dermot O’Leary comments: Economic View; A comparison of US and Irish housing output trends - -"Collapses in housing output have been par for the course for a whole host of developed economies in the recent recession. Yesterday’s disappointing numbers from the US suggest that house-building intentions, while above the lows of earlier in the year, remain quite weak. In October, the annualised rate of starts dropped 10% to 529,000, although weather issues and speculation about the ending of the tax incentive may have played a role in this monthly fall. US housing starts peaked in February 2005 at 2.2 million, so are currently hovering some 76% below the peak. This is obviously a substantial reduction in new supply, while house price declines would have been even more severe were it not for this curtailment. The same can be said for Ireland, but a comparison of the trends here relative to the US shows clearly the degree to which output has collapsed.
Using the housing registrations data as a proxy, the peak in new supply actually occurred after the US peak – in the summer of 2006 – but in the past three months, registrations were running at a rate which is 95% below that peak. Both markets still have housing oversupply issues to deal with, and it is unlikely that new housing construction will take off until these issues are resolved. In the US, progress is indeed being made. The month’s supply of new homes for sale has fallen to 7.5, from its peak of over 12, but is still above its long-term average of 6. In Ireland, it is not possible to accurately calculate this figure, but we have previously stated that the month’s supply of second-hand homes on the market stands at 19, and trends in the US market suggest that this indicator tends to track trends in the new homes market quite well. On this basis, a further recovery in US housing output can be expected well before it happens here."
