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Markets News Monday: Ryanair and Aer Lingus rise in Dublin; UK Manufacturing PMI rose to 15-year high at the start of 2010
By Finfacts Team
Feb 1, 2010 - 10:50:57 AM
UK Manufacturing PMI rose to 15-year high at the start of 2010
January data from CIPS/Markit signalled that the UK manufacturing sector built on its solid end to 2009. The headline seasonally adjusted Purchasing Managers’ Index (PMI) rose to 56.7, from an upwardly revised figure of 54.6 in December, to record its highest level since October 1994.
The headline PMI - - which provides a single figure indication of operating conditions in the manufacturing sector – has now remained above its no-change level of 50.0 for four consecutive months. The index is calculated using data collected on new orders, production, employment, supplier performance and stocks of purchases.
Manufacturing production increased for the eighth successive month in January, with the rate of expansion the quickest since June 2006. Higher output mainly reflected improved intakes of new work and efforts to clear outstanding business. Total new orders rose at the fastest pace in six years, underpinned by stronger domestic demand and the steepest growth in new export orders since (exports) data were first collected at the start of 1996.
US insider trading investigation
The Special Inspector General for the Troubled Assets Relief Program (TARP) Neil Barofsky on Saturday announced that in the fourth quarter he began 25 criminal and civil probes in the quarter, and had 77 total active cases involving the financial bailout funds.
Examiners are looking into possible wrongdoing linked to the financial-industry bailout, including insider trading, accounting violations, mortgage fraud, obstruction of justice and money laundering.
According to a quarterly report to Congress published on Saturday, through the third quarter of 2009, Barofsky’s office opened 61 cases with 54 active.
President Barack Obama will today announce a $3.8 trillion budget for fiscal 2011, beginning on Oct 1st, that forecasts the deficit rising to a record $1.6 trillion in the current fiscal year but dropping to about $700 billion, or 4% of GDP (gross domestic product) by the end of his term in 2013.
However to cut the deficit and to bring it down to further to 3% of GDP by 2015, the President will announce a bipartisan debt commission to recommend spending cuts and maybe tax rises. President Obama is expected to issue an executive order establishing the commission as part of the budget he is set to unveil Monday.
Last week, mainly Republican opposition in Congress, voted down a proposal to establish a debt reduction commission which would have given a commitment to implement recommendations.
The deficit hit a record $1.4 trillion last year and with unemployment high, and continuing demands for stimulus spending, it will be a huge challenge to cut the $1.3 trillion deficit Obama inherited in half by 2013.
The 2010 budget forecasts the deficit falling to 5% of GDP - - or about $830 billion by the Congressional Budget Office's new economic forecast - - by 2013 through economic growth alone.
Policy changes, such as a proposed freeze in non-security, domestic spending, would reduce the total by an additional percentage point.
There is "no plan B" for Greece, says Par Magnusson, senior analyst at Danske Bank. He shares his outlook for the troubled economy, with CNBC's Anna Edwards and Lisa Oake:
Toyota
The New York Times reports today on a 911 call that came at 6:35 p.m. on Aug. 28th from a car that was speeding out of control on Highway 125 near San Diego, California.
The caller, a male voice, was panic-stricken: “We’re in a Lexus ... we’re going north on 125 and our accelerator is stuck ... we’re in trouble ... there’s no brakes ... we’re approaching the intersection ... hold on ... hold on and pray ... pray ...”
The call ended with the sound of a crash.
The Lexus ES 350 sedan, made by Toyota, had hit a sport utility vehicle, careened through a fence, rolled over and burst into flames. All four people inside were killed: the driver, Mark Saylor, an off-duty California Highway Patrol officer, and his wife, daughter and brother-in-law.
It was the tragedy that forced Toyota, which had received more than 2,000 complaints of unintended acceleration, to step up its own inquiry, after going through multiple government investigations since 2002.
Yet only last week did the company finally appear to come to terms with the scope of the problem — after expanding a series of recalls to cover millions of vehicles around the world, incalculable damage to its once-stellar reputation for quality and calls for Congressional hearings.
Bloomberg also reports today that that Toyota Motor Corp.’s head of US sales plans to make US television appearances today, starting with NBC Universal’s “Today” show, as the world’s largest automaker works to resolve its biggest recall crisis.
Jim Lentz, president of Toyota Motor Sales USA, is to speak on the morning news and talk program before holding a conference call with other media organizations, said a company official who declined to be identified because the plan isn’t public. Lentz may also appear on Bloomberg Television.
HSBC retained the top spot as the world's leading bank brand for third year in the row, according to the latest report from Brand Finance Monday. David Haigh, CEO of Brand Finance, spoke to CNBC about banking brands:
Asia
China's manufacturing PMI (Purchasing Managers’ Index) hit a survey high at the start of 2010, pointing to sharp growth of the Chinese manufacturing sector while India's manufacturing sector expanded at fastest pace for nearly one-and-a-half years in January - - see link to story in box below.
The MSCI Asia Pacific Index dipped 0.3% Monday.
The Shanghai Composite Index slid 1.7% on fears of further monetary tightening
Goodbody chief economist, Dermot O’Leary, comments: Economic View; Central Bank joins the upgrade cycle for the Irish economy - - "A long period of forecast downgrades for the Irish economy has now given way to a modest upgrade cycle, with the Central Bank (CB) being the latest organisation to become more confident that the worst of the contraction has now passed. In its first Quarterly Bulletin of the year, the CB implemented upgrades to its 2010 economic growth projections of close to 1%. It now expects GDP to contract by 1%, with GNP set to fall by 2%. Both forecasts are not far off our estimates (-1.1% and -1.3% for GDP and GNP, respectively).
No forecasts were published for 2011, but it was reported that CB officials guided growth in the 2.5%-3% range, again similar to our own thinking (2.5% GDP). A key driver of our forecast revisions over the past number of months has been net trade, and the same can be said for the CB. Domestic demand, though, is still expected to be weak for some time, with the CB in the same camp as us, which suggests that the combination of further job losses, reductions in pay and full-year effects from last year’s tax hikes will lead to a further reduction in consumer spending.
This will be the swing variable in Irish economic growth forecasts for this year. Full-year forecasts can be somewhat deceiving; It is important to point out that most forecasters, including ourselves, expect growth to resume in the second half of 2010. Ireland still faces a tough economic environment in 2010, but with forecasts now going in the right direction, it is clear that the worst of the recession is now behind us."
Davy chief economist, Rossa White, comments: Window into Irish economy's start to the year this week - - "No data on the Irish economy have yet been released for 2010. That changes today when PMI manufacturing numbers are due. Since May of last year, when we first raised our forecasts, we have maintained that the Irish economy would bottom early this year. In real-time, the surveys are key: we expect to see the manufacturing and services PMIs nudge back above 50 by April at the latest (today's data are for January).
Lagging data are no good in judging whether the economy is out of recession. The only real-time data available for Ireland are the PMI readings for manufacturing/services/construction, consumer confidence, Live Register of benefit claimants and tax revenue (each due this week for January). To call turning points in the economy, all bar the PMIs have drawbacks. Consumer confidence is useful, but it has been no more than an indicative guide to spending in the past. The Live Register is fairly coincident, rather than lagging, even though it is a labour market indicator. But a backlog of claimants from the dramatic slide in the economy a year ago is skewing the numbers a little at present. Unfortunately, tax revenue cannot be seasonally adjusted thanks to annual changes. So the month-on-month trend is hard to grasp.
That leaves the PMIs, and the trend is worth following closely. Readings are back at a level seen in late 2007/early 2008 when the economy was entering recession. Now those readings are on the way back up (rather than heading south) but still below the 50 line dividing decline and growth. The PMI manufacturing was unchanged at 48.8 in December, while services rose to 48.3 that month. Construction is a long way from growth (it won't bottom in 2010): its reading is 32.6. Look for manufacturing and services to nudge back above 50 in the next three to four months, meaning that three-fifths of the economy will have emerged from recession."
