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Markets News Wednesday: UK GDP contracted in Q3 2009 less than previously estimated; Eircom quarterly revenue dips 9%
By Finfacts Team
Nov 25, 2009 - 9:32:53 AM
The UK economy contracted less than previously estimated in the third quarter as consumer spending stopped declining and the recession in the service sector eased.
GDP (gross domestic product) fell 0.3% from the previous three months, compared with an estimate of 0.4% in October, the Office for National Statistics said today in London.
Construction output is estimated to have fallen by 1.1%.
In real terms, household expenditure was broadly unchanged from the level of the previous quarter, while gross fixed capital formation fell by 0.3%.
Eircom, the former Irish State telco, which is currently owned by an Australian fund, today reported a 9% drop in revenue for the first quarter ending September.
Revenues fell to €468m, while earnings before interest, tax and depreciation dropped less than 1% to €168m.
The company said that its operating costs were 11% lower than last year, which reflected significantly reduced labour costs and other operating expenses.
Eircom's fixed line revenues were down 9% to €364m due to lower voice traffic and higher discounts for its various offers and bundles.
Revenues at the mobile division Meteor fell 6% to €119m due to lower average revenues per user. However, this was partially offset by customer growth, especially in mobile broadband.
Eircom said its total mobile customer numbers stood at 1,046,000 by the end of September, up 38,000 from the same time last year. 20,000 people signed up to Meteor in the three months to September.
Its average montly revenue per user was down 8% to €36.02, mainly due to the impact of new call price plans and changes in traffic mix.
Britvic, which owns the Ballygowan, 7 UP and Club Orange brands, today reported a 5.6% drop in annual revenues at its Irish operations and said the market shows no sign of a return to growth in the short term.
The company said Irish revenues for the year ending September fell to £189.5m sterling from £200.7m in 2008. Its Irish operating profits fell by 17% to £12.2m from £14.7m.
Discussing whether public anger will grow across America, with Dan Fitzpatrick, StockmarketMentor.com; Ken Fisher, Fisher Investments; Joseph LaVorgna, Deutsche Bank, Peter Morici, University of Maryland and Niall Ferguson, Harvard University:
US
Bloomberg reports that Federal Reserve policy makers said for the first time that their decision to cut interest rates to zero may be fueling undue financial-market speculation even as they called the dollar’s decline “orderly.”
The Federal Open Market Committee said its policy of keeping rates low might cause “excessive risk-taking” or an “unanchoring of inflation expectations,” according to minutes of its Nov. 3-4 meeting released yesterday. Central bankers also said further dollar depreciation that might “put significant upward pressure on inflation would bear close watching.”
The dollar weakened as investors wagered the central bank will tolerate further declines in a currency that has slid more than 6% against the yen in three months. Policy makers are wary of fueling a third asset-price bubble in about a decade as they hold the benchmark interest rate near a record low to revive growth, economists said.
Fed policy still underpinning risky assets
Davy chief economist Rossa white comments: "Most of this week's news is squashed into the three days leading up to the Thanksgiving holiday tomorrow (November 26th) in America. There is plenty to digest, but yesterday's Fed minutes are perhaps the most important from a market perspective. They showed that the amount of division among the committee has been exaggerated and that there is commitment to easy policy for some time yet. Elsewhere today, the first estimate of UK Q3 GDP will probably be revised up but probably not by enough to confirm the recession's end.
The short end of the bond market continues to rally significantly (two-year treasury yields are closing in on the cyclical low of a year ago, although there has been a year-end safety effect both years). It is also favourable for housing and the banking system that 30-year mortgage rates are back down to 5% thanks to the strength of the long end too. Certainly, yesterday's minutes did nothing to suggest that the hawks are gaining influence among the FOMC.
The output-based estimate of UK Q3 GDP recorded a decline of 0.4%. The consensus estimate is for a slight upward revision to -0.3%. But the resilience of retail sales and rising confidence point to the potential for total consumer spending (including services expenditure) to surprise, and business investment (released yesterday) has already beaten market expectations. However, those factors may not do quite enough to see the percentage change revised to a positive number. It is industry rather than services that has (as usual) held back the UK economy in recent months despite sterling's depreciation."
US markets
The revision of third quarter GDP down to an annual rate of 2.8% compared with an initial estimate of 3.5%, dampened sentiment in New York Tuesday.
The Dow fell 17 points or 0.16% to 10,434.
The Nasdaq fell 0.31% and the S&P 500 declined 0.05%.
Asia
The MSCI Asia Pacific Index rose 1.0% Wednesday.
Japan’s exports fell 23.2% from a year earlier in October following a 30.6% dip the previous month, the Finance Ministry said today in Tokyo. The drop was the smallest in a year.
The Nikkei rose 0.43%; the Shanghai Composite added 2% after a loss of more than 3% on Tuesday.
India's BSE Sensex 300 advanced 0.36% and Australia's S&P/ASX 200 rose 0.79%.
Gold has the potential to reach $1,300 an ounce without creating a bubble, says David Costa, dean from Robert Kennedy College. He tells Ralph Silva, research director from TowerGroup, CNBC's Rebecca Meehan & Chloe Cho why:
Goodbody analyst Marina Houghton comments: Irish Financials; RICS survey predicts level of distressed properties to increase in Q4 2009 - - "An article in this morning’s Irish Independent highlights the latest survey from the Royal Institute of Chartered Surveyors for Q3 2009, which polls agents regarding distressed property coming onto the market. The latest survey indicates that Ireland has moved up from being ranked in seventh position in Europe in terms of the number of agents reporting an increase in distressed properties, to fourth, behind Russia, the USA and Spain with regard to distressed properties expected to come in the last quarter of 2009. In addition, new interest in Irish distressed properties from international funds remained flat in Q3, having spiked up in Q2.
The article highlights recent distressed sales by Anglo and ACC (mainly in the residential and pub sectors), but points to some key sectors, such as offices, retail and development land, which have seen “relatively little” distressed sales activity so far into the downturn, however Savills has indicated that it expects the banks to sell off some development land in the coming months."
