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Markets News Thursday: Investors spooked by China lending curbs; Ryanair carried record 65m passengers in 2009 - - says third Aer Lingus bid unlikely
By Finfacts Team
Jan 7, 2010 - 11:36:40 AM
Stocks across the world fell Thursday MSCI Emerging Markets Index down the most in three weeks, and metals declined after China moved to curb lending. The yen dropped after Japan’s new finance minister said he would welcome a weaker currency.
Ryanair
Ryanair announced today that it carried over 65 million passengers in 2009 (calendar year), an increase of over 7million passengers (13%) on its 2008 traffic. Ryanair capped off an extraordinary year of growth by carrying 5million passengers in December, 12% more than in December 2008. It also said a third bid for Aer Lingus is unlikely.
Ryanair said it set a new monthly record in July when it carried over 6 million in one month for the first time, a record which it repeated every month from July to October (inclusive). August became Ryanair’s busiest month ever when over 6.9million passengers travelled on one of its lowest fares no fuel surcharges guarantee seats.
Ryanair also said today that it plans to return cash to its shareholders from 2013 as it cuts capital spending by more than 90% after withdrawing from talks to buy 200 aircraft from Boeing.
Ryanair also rejected recent speculation that it was preparing a third bid for Aer Lingus.
"In the absence of any decision by the Irish government to sell its 25% stake, a third bid by Ryanair remains highly unlikely," Ryanair said in a statement published ahead of a briefing for its investors.
Chief executive Michael O'Leary said he expected its cash reserves of €2.5 billion to grow "substantially" by March 2013 due to the cutback in spending.
Aer Lingus confirms start of United venture
Aer Lingus has announced that its code-share agreement with United Airlines to jointly operate service between Washington Dulles and the Spanish capital Madrid, will begin on March 28th.
Aer Lingus says additional routes may be made available for sale during 2010 to start operation in Summer 2011.
Both airlines will equally share the commercial and operational benefits and risk, with Aer Lingus managing the operational aspects of the new services and United Airlines taking responsibility for generating revenue.
Fed stance to continue to support equity market
Goodbody chief economist, Dermot O’Leary, comments: "There was a general agreement between FOMC members at its last meeting of 2009 that downside risks to the economic outlook had diminished, given the strength of the incoming data. Although not much had changed since its November meeting, the central bankers generally agree that the economic recovery will continue. Increased optimism was expressed with regard to the biggest and most important part of the US economy – the consumer – with recent upward revisions to household income and slowing job losses backing up this optimism. Financial markets were seen to be more supportive of economic growth, businesses were reducing inventories at a slower pace, while the improvement in the international economy was seen to be auguring well for US exports.
In fact, the only deteriorating area of the economy seems to remain in the commercial real estate sector, where the Fed remains pessimistic. One might think, given this outlook that an imminent withdrawal of its stimuli is on the cards. Not so. Taking lessons from previous financial crises, the FOMC believes that the recovery will prove to be “rather slow”. While one member suggested the recent improvement in financial conditions warranted a scaling back in asset purchases, more than one noted that it might be “desirable at some point in the future to provide more policy stimulus”. Withdrawing of the stimulus, therefore, is not on the agenda in the near-term. Given the role that this liquidity has played, equity markets should welcome the news that the Fed is in no major rush to take it away."
The US economy will slip back into recession in the second and third quarter of 2010 as the boost from fiscal stimulus measures and inventory rebuilding wears off, James Shugg, senior economist at Westpac Bank, told CNBC Wednesday:
US markets
On Wednesday, the Dow rose 2 points to 10,574.
The S&P 500 advanced 0.05% and the Nasdaq fell 0.33%.
Asia
The MSCI Asia Pacific Index dipped 0.5% Thursday.
The Nikkei 225 dipped 0.46%; the Shanghai Composite dropped 1.89% and Australia's ASX/S&P 200 declined 0.45%.
Bloomberg reports Japan’s Finance Minister Naoto Kan sent the yen tumbling in his first day in office, saying he would like the currency to weaken “a bit more,” and pledging to monitor its level.
“We will make efforts to make the yen an appropriate level while considering various impacts on the economy that may be caused by currencies,”Kan said in his inaugural press conference in Tokyo today. While the yen has had a large correction since reaching a 14-year high in November “I hope it will correct a bit more,” he said.
Susumu Kato, managing director and chief economist at Calyon Capital Markets speaks to CNBC's Oriel Morrison about the resignation of Japan's finance minister and the impact of his replacement, Naoto Kan, on the economy:
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.
China is unlikely to do a one-off revaluation of the yuan over the next 12 months, believes Qu Hongbin, senior economist at HSBC Global Markets. He explains why to CNBC's Martin Soong & Sri Jegarajah:
The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009.
On Monday, the BDI rose 135 points or 4.49% to 3,140; On Tuesday, the index rose 140 points to 3,270; On Wednesday, the index fell 11 points or 0.45 to 3,259.
Davy chief economist, Rossa White, comments: Irish spreads have tightened since Budget: "In the last two trading days, Ireland's bond spreads have widened a touch again. That may reflect delayed acknowledgement of Finance Minister Lenihan's illness. But in the four weeks since the Budget up until Monday, Ireland had tightened by 50 basis points versus German bunds (based on the 10-year bond). In the same period for example, Greece's CDS had shot higher, suggesting that Ireland is finally getting credit for having stabilised its budget deficit. We expect the relative rally in Irish paper to recommence as the year progresses.
It is interesting to compare Irish and Greek CDS spreads since December 1st. At that point, Ireland was trading at 166 basis points (bp); Greece was at 184bp. Fast forward to yesterday and Ireland had slipped to 147bp, while Greece was fully 100 basis points wider at 249bp. There was little reaction from the market to the EU delegation travelling to inspect Greece's fiscal plans. The full story will take a number of days to emerge.
Meanwhile, Tuesday's numbers meant that Ireland's General Government deficit will be lower than was expected at Budget time. It is likely to be around 11.3-11.4% of GDP (it won't be fully signed off for a couple of months). That compares with a Budget day estimate of 11.7%. Crucially, the 2009 GGB deficit was the worst point of the cycle. We project that the deficit will fall to somewhere between 10.5% and 11% of GDP in 2010. The base for tax revenue is higher than the government expected, and its 2010 forecasts for revenue and unemployment claimants look too conservative."
Goodbody economist, Deirdre Ryan, comments: Economic View; Regional divergence an ongoing theme in house price developments -- "The latest report from property website daft.ie on asking house prices indicates a continuing trend of falling asking prices, while regional divergence remains a feature also. In the final quarter of the year, asking prices fell 5.5% qoq (-6% qoq in Q2), bringing the total decline for 2009 to 19%. From the peak in early 2007 asking prices nationally have dropped by 30%, as vendors continue to adjust to more realistic selling price expectations. However, adjustments in asking prices have not been uniform on a regional basis, with Dublin and the surrounding area continuing to record asking price declines greater than the national average. Dublin asking prices have fallen 35% from the peak, while Dublin city centre asking prices lie more than 40% below peak levels.
These greater than average reductions in asking prices, and thus transacted prices are having an effect on transaction and stock levels also. For instance the stock of properties for sale in Dublin is down 17% yoy according to daft, while the national stock for sale has dropped only 3%. In addition it is taking just four months for a Dublin property to sell once placed on the market relative to 9 months nationally. Nevertheless, despite these initial signs of stock levels beginning to unwind, the inventory for sale remains at a high level. Our own analysis of the inventory suggests there are currently 54,300 second hand houses for sale nationally, which we estimate equates to approximately 19 months of supply.
As such, downward pressure on new supply is likely to remain for some time to come given this high inventory level. Scheme developments in particular are set to remain anaemic for a prolonged period. Housing registrations for 2009 fell 70% compared to 2008, with just 3,743 houses registered for the year. While completions for 2009 totalled close to 26,000 units, the low level of starts last year indicates that 2010 will see just 12,000 units completed in our view. While the adjustment in the housing market is well advanced, there is further to go yet."
