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 Friday: Government and Aer Lingus hold separate witching hour talks with unions; Shares slide in Europe
By Finfacts Team
Dec 4, 2009 - 11:15:00 AM
The Government and Aer Lingus held separate witching hour talks with trade unions early Friday morning.
Talks on reducing public payroll costs between Government officials and trade unions, were adjourned at 2am.
On Thursday, Taoiseach Brian Cowen and Minister for Finance Brian Lenihan gave assurances that the Government would achieve €4 billion in savings in Wednesday's Budget, which would include public pay cuts.
Chief union negotiator Peter McLoone said last night that while he knew people in Government and on the backbenches were unnverved by unpaid leave plans, it was"critically important that people hold their nerve and wait for the outcome."
Following objections from Fianna Fáil TDs, Cowen found some backbone and rowed back from a wishy-washy set of aspirations centred on unpaid leave.
Meanwhile, talks between Aer Lingus management and unions on a €97m savings plan also continued overnight at the Labour Relations Commission.
Negotiators representing cabin crew staff at Aer Lingus are reported to have left talks at 1.30am, while it is understood that IALPA - - the union representing pilots - - remained until 5am.
The Aer Lingus board is due to consider proposals at a meeting later today.
Yesterday, the airline established a “task force” to “begin the process of planning compulsory redundancies and fleet reduction.”
In a statement, the airline said that despite"exhaustive" negotiations with all union groups, it was no closer to an acceptable deal. Aer Lingus said that it believed it was still too far from bridging the gap with the demands of pilots and cabin crew.
Goodbody analyst Eamonn Hughes commented: Airlines; Aer Lingus looks to be moving ahead with compulsory redundancies - - "Press reports this morning indicate that Aer Lingus last night confirmed it is moving forward with compulsory redundancies at the airline after failure to agree with all unions on its Transformation Programme to deliver €97m of savings. This original plan sought the cutting of 676 positions at the airline. Failure to agree means that the airline is now seeking these savings elsewhere and is moving onwards to reduce further capacity (long haul by 2 aircraft to 4 and short haul by c.15% to 28 aircraft), cut routes and seek circa 1,000 redundancies on a compulsory basis.
The airline is now setting up a taskforce to begin the process of planning the compulsory redundancies. Yesterday, the IMPACT union indicated that it believed the cabin crew could reach agreement with the airline, meaning that would still leave the pilots. As we indicated yesterday, unfortunately, this process is going to play havoc with estimates until a settlement is reached. Our existing estimates reflect the restructuring plan as originally outlined. However, the alternative plan outlined by management, which would see additional capacity cuts and further redundancies, could pose risks to our forecasts. On the one hand, grounding planes with no pay in the winter months, should industrial action proceed, might actually save money, but it could add to yield uncertainty subsequently as AERL subsequently prices to "win customers back.""
Greece has a great deal of difficulties in terms of its economy and requires bold decisions, but there is no danger of any Eurozone country defaulting on its sovereign debt, ECB President Jean-Claude Trichet told CNBC Thursday when discussing the central bank's economic stimulus measures.
ECB unlikely to hike until Q3 2010
Davy's chief economist Rossa White commented today: "The last European Central Bank (ECB) meeting of the year took place yesterday. It left its refi rate at 1%. The news was that it changed its growth and inflation forecasts, amended the terms of its last 12-month repo and hinted that market expectations on rate hikes are about right. We expect the first 25bps hike to occur in Q3 2010.
On the face of it, the ECB's inflation forecasts would not justify a rate hike as soon as late summer next year. In 2010, the mid-point of its HICP range is 1.3%. More importantly, for 2011, the mid-point of the 0.8-2% range is 1.4%. Its mandate is to keep inflation close to, but below, 2% in the medium-term. Inflation expectations remain subdued, as per the bond market and surveys. And we know that the ECB is going to gradually unwind its emergency measures, as it flagged again yesterday. Yet the ECB probably feels that it has to make the cost of funds dearer as a plank to avoid excess liquidity in the next couple of years. At the same time, its growth forecasts (1.2% mid-point for GDP in 2011) look conservative. It will probably end up revising its inflation forecast higher as a result.
For the Irish banking system, the change in the 12-month repo facility is of note. That last facility will be take place on December 16th. The new formula means that the rate for the repo will no longer be fixed at 1% for the year; it will be fixed at the average minimum bid rate at main refinancing operations over the year. In other words, it will be based on the average refi rate for the year. Banks will have to repay the interest only on the maturity date (December 23rd 2010). That means the final rate paid will be somewhere in the 1.1-1.15% range, assuming that the ECB hikes first in Q3 of next year and that the second hike is not until around the maturity date."
ECB President Jean-Claude Trichet signaled an end to the central bank's ultra-loose monetary policy Thursday. Chris Watling, CEO of Longview Economics, has analysis:
US markets
In New York Thursday, the Dow fell 86 points to 10,366.
The S&P dipped 0.85% and the Nasdaq dropped 0.54%
The Institute for Supply Management reported that the US service sector contracted in November.
The Wall Street Journal says today that job market is getting less bad, but a full recovery remains a distant hope.
The Bureau of Labor Statistics releases November employment data Friday morning. Economists estimate that unemployment held steady at 10.2%, a 26-year high, and that nonfarm payrolls shed 125,000 jobs, bringing the job losses in this recession to 7.4 million.
Given the downturn's depth, some optimists think jobs will return quickly. They got some ammunition on Thursday, when new weekly claims for jobless benefits fell to a 14-month low. Payroll cuts, meanwhile, have steadily gotten less bad and could end soon.
But fast-snapback hopes are countered by a mountain of data suggesting the recovery from this recession will be just as jobless as the prior two.
The percentage of jobless workers on permanent layoff, with no hope of getting called back to work, is at a record 55.1%.
A record 9.3 million are working part time because there's nothing else available. Employers might work them harder before hiring more workers.
Bernanke gets raosting
Federal Reserve Chairman Ben Bernanke on Thursday got a roasting from both political sides at his Senate confirmation hearing, for a second term.
Senate Banking Committee Chairman Chris Dodd, said he would support confirmation but argued that the central bank should be stripped of some of its bank regulation powers due to its past failures of oversight.
Bernanke admitted some mistakes and was assailed over paying counterparties of bailed out insurance giant AIG, the full amount of outstanding liabilities, including investment bank, Goldman Sachs, which received $12.9 billion..
Long-time Bernanke critic Republican Jim Bunning, said he was ready to do everything he could to block or delay the confirmation, joining a similar threat made late Wednesday by Sen. Bernie Sanders, the Socialist senator from Vermont who is among the 60 members of the Democratic caucus.
The threat of a filibuster by Sanders and Bunning, two senators with diametrically opposed views on most issues, shows the extent of the anger towards Wall Street.
A filibuster would mean that Bernanke would need to get at least 60 votes, rather than the simple majority of 51, in order to be confirmed.
Jim Bunning even called the Fed,"the Creature of Jekyll Island."
A recap of Bernanke being grilled by Senators who for the most part say he deserves a second term and insight on why he should not be re-nominated, with Sen. Jim DeMint (R-SC) and CNBC's Hampton Pearson:
Asia
The MSCI Asia Pacific Index fell 0.12% Friday
The Nikkei added 0.45%; the Shanghai Composite rose 1.61%; India's BSE Sensex 30 dipped 0.49% and in Sydney, the S&P/ASX 200 fell 1.52%.
In Europe, the Dow Jones Stoxx 600 is down 0.51% Friday.
The ISEQ is off 0.64% in Dublin.
Abbey is up 7.5%; Aer Lingus has added 3.6% and Elan is down 2.7%.
House builder Abbey today reported pre-tax profits of €3.6m for the six months to the end of October. This compares to a pre-tax loss of €5.4m the same time last year, but the company termed prospects as "dull."
Half yearly revenues fell from €56.1m to €41.67m as the company said it had completed just 222 sales in the half year - - 170 sales in the UK, 49 in Ireland and three in the Czech Republic.
Abbey said that market conditions in the UK steadily improved over the the six month period while the firm also had "considerable success" in clearing inventory. But sales continue to be slow in Prague.
"Although we expect modest profitability this year we can not yet rule out the possibility of further stock losses in our Irish operations," the company said.
Goodbody's David O’Brien commented: "Overall, these results have little bearing on our NAV forecast for 2010 of circa €6.40. At the current share price of €4.40 and assuming the market is valuing the UK housing division at 0.83x (in line with the sector average at present) and applying a conservative 0.5x PNAV multiple to the remainder of the divisions (UK Plant Hire and the Czech Housing), this implies the market views the Irish business as valueless. This appears excessive give that we estimate the Irish assets have already been written down by circa 50%. Given these factors, we believe the stock is currently undervalued and, therefore, reiterate our BUY recommendation, with a price target of €6.00."
The BDI slid 41% in the third quarter and rose 40% in October.
The index fell 11.8% last week to 3,974 points as the global benchmark for freight costs extended its correction after hitting a 2009 high in the previous week.
On Thursday, the index rose 144 points or 3.7% to 4,062.
Goodbody economist Deirdre Ryan, commented: Economic View; ECB begins removing the punchbowl, from the banks at least - - "The ECB yesterday took the first baby steps to removing the exceptional liquidity measures it has been providing since the onset of the credit crisis. After reiterating the comment that not all the measures would be needed on the same scale as previously, the ending of the 12 month liquidity operations later this month was confirmed, while the 6 month operations will cease next April. Other measures currently in place will be unwound in a ‘gradual and timely’ manner.
So while the ECB is treading slowly, it is nonetheless displaying a desire to wean banks in the Eurozone off this type of funding. This is despite a still cautious outlook on the economy, although decent upward revisions were made to growth projections for next year. Output is now seen expanding by 0.7% in 2010, up from 0.2% in September’s estimate. For 2011, their initial estimate of growth is 1.2%. Inflationary pressures are seen as remaining very subdued against such a backdrop, with projections remaining relatively unchanged versus previously.
For 2010, Eurozone inflation is seen as averaging 1.3% (1.2% in September), while even for 2011, inflation is expected to average a very moderate 1.2%. Nevertheless, despite the fact that inflation is seen to be well below the 2% target even in 2011, and interest rates movements remain some way off, the ECB is clearly reluctant to leave in place some of the credit support measures for a prolonged period. In this regard, it appears to be well ahead of some of the other main central banks. "
