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Markets News Afternoon: Shares dip in Europe and US; Initial US weekly jobless claims fall; White House expects average monthly jobs gain of 95,000
By Finfacts Team
Feb 11, 2010 - 4:17:35 PM
ECB Presudent Jean-Claude Trichet arriving for the EU summit in Brussels, Thursday Feb 11, 2010
Eurozone leaders on Thursday promised to help Greece if it cut its budget deficit, saying they would provide “determined and co-ordinated action if needed to safeguard stability” in the currency area.
Under an agreement agreed in Brussels, the 16-country Eurozone did not offer immediate financial aid for Greece, but offered an implicit commitment to assist Athens if it had problems in refinancing its sovereign debt later this year. In return, Greece is expected to “do whatever is necessary including adopting additional measures” to cut its deficit. Greece, which represents 2.7% of the Eurozone economy, had a budget deficit of 12.7% of GDP (gross domestic product in 2009 - -more than four times the euro system's 3% limit.
The Greek government needs to sell €53 billion of debt this year. Figures from the Bank for International Settlements - - sometimes referred to as the central bank for the world’s central banks - - show that European exposure to Greece is concentrated in French and Swiss banks, each with almost $79 billion (€58 billion). The Wall Street Journal said on Wednesday, that German banks are major lenders in Greece, for example, collectively carrying about $43bn in Greek debt on their books, including loans to private individuals and companies, according to Bank for International Settlements data for the third quarter of 2009. Among EU countries, only France's banks, a larger share of Greece's $303bn in debt to foreign banks.
Spain is the last big European economy in recession, official data showed today.
Europe's fifth-largest economy had a budget deficit to GDP (gross domestic product) of 11.4% in 2009.
The Spanish economy contracted 0.1% in the fourth quarter of 2009 compared with the third, the national statistics agency INE said today - - the sixth quarterly contraction in a row.
The statistics agency said gross GDP contracted by 3.1% compared to the last three months of 2008, with the economy shrinking 3.6% overall in 2009.
Despite four various EU presidents being present at the special European Union summit held in Brussels Thursday, German Chancellor Angela Merkel "is really calling the shots at this summit," Jacki Davis from European Policy Centre said. "If there is to be a bailout of Greece, to help them out, the lead has got to come from her."
KBC Ireland
KBC Bank Ireland today reported profits, after tax and impairment costs, of €92m for 2009, down over 10% from the 2008 result.
The bank is a subsidiary of Belgian bank KBC, and said that its credit impairment costs rose to €176m, reflecting the sharp deterioration in the economic environment.
Its overall loan portfolio fell to €18 billion from €18.8 billion the previous year due to what the bank called very limited demand.
It said the arrears statistics in both the home loans and business categories showed a marked increase in the first half of 2009, however the rate moderated in the second half of the year as some signs of stabilisation were evident.
The bank said its home loans and residential investment loans amounted to €13.4 billion by the end of the year, which represents about 9% of the Irish market.
KBC said that property lending comprises €1.7 billion, or 9.4% of its overall loan book. Of this property development lending comprised €0.6 billion, or 3.5% of the bank's overall loan book.
"The situation (in Greece) is really very serious," Diego Iscaro from IHS Global Insight said Thursday. He sees the Greek government "implementing very tough measures for bringing down the deficit," adding that there is a "lack of clarity on these very ambitious targets" the government has set.
Galway Black Shore group
The High Court has appointed an examiner to four companies in the Black Shore group owned by the Galway businessman John Sweeney. The business activities range from petrol stations, a hotel and property and employ 140 people.
Mr Justice Brian McGovern said he was satisfied there was a reasonable prospect of survival if the conditions set out in an independent accountant's report were met.
The largest creditor, Anglo Irish Bank, which is owed €55m in loans and cross company guarantees, opposed the application.
Mr Justice McGovern rejected submissions from Anglo that there would be little difference between the appointment of an examiner and a receiver.
He said the most significant piece of evidence to weigh up that decision related to the Marriott Hotel in Galway as the hotel seemed to be bucking the trend and performing well.
Fáilte Ireland had expressed a view that this was due to the management style of Sweeney and his employees.
The Judge said it was easy to see how this could "change dramatically" in a receivership where Sweeney would lose effective control over the hotel.
Parsing today's economic data with Jim Iuorio, of TJM Institutional Services, and the CNBC news team:
US markets
The Dow Jones has dipped 18 points or 0.18 to 10,020.
The S&P 500 has dropped 0.33% and the Nasdaq has lost 0.17%%.
US initial jobless applications dropped by 43,000 to 440,000 in the week ended Feb. 6th, the lowest level in five weeks, from 483,000 the prior week, the Labor Department said today. The total number of people receiving unemployment insurance and those receiving extended benefits decreased.
Continuing claims dipped to 4.54 million in the week ended Jan. 30, the fewest since January 2009.
The White House said today it expects nonfarm-payroll employment to increase by an average of 95,000 jobs a month this year, suggesting the US labour market will continue to recover slowly as the economy emerges from its two-year slump.
In the annual Economic Report of the President, the Obama administration said there was "clear evidence" that the jobs market is stabilizing, but said that with millions of people still out of work more needs to be done to spur hiring.
In Europe, the Dow Jones Stoxx 600 has declined 0.33% Thursday.
In Dublin, the ISEQ has dipped 0.35%.
CRH has lost 2.01% and Elan has dropped 1.54%.
Spirits maker and owner of Guinness, Diageo, said markets were starting to recover and should turn around by mid-2010 after higher bonus payments and a minor sterling rally ate into its half-year earnings. CEO Paul Walsh told CNBC the first half numbers "are very much a tale of two quarters." He sees growth momentum from the second quarter continuing:
Global oil demand and prices will rise in 2010, driven higher by robust growth in emerging economies, the Paris-based International Energy Agency said today, raising its demand and prices forecasts.
On the New York Mercantile Exchange, oil for March 2010 delivery is trading at $74.16 down 36 cents from Wednesday's close. In London, Brent crude for March delivery is trading at $72.60 a barrel.
Currencies
The euro is trading at $1.3633 and at £0.8734.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
