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Markets News Afternoon: European Commission begins anti-trust action against IBM; Irish exports account for over 90% of GDP - - growth of multinational profits will dampen GNP
By Finfacts Team
Jul 26, 2010 - 5:13:49 PM
The Bank of Ireland said today
Quarterly Review that in its upturn has been led by the external
sector and exports will continue to be the main driver of activity, boosted by
global demand, with sales to the UK also supported by the past year’s rally in
sterling against the euro. A range of monthly indicators are now pointing to a
broadening of the Irish recovery, including retail sales, which look set to
record very strong growth in the second quarter. As a consequence, the bank expects
overall consumer spending to increase in Q2 and to rise further as the year
unfolds, although the carry-over effects of last year’s 7% fall will leave
average growth for the year flat in 2010.
The recent data also points to a possible
cycle floor for house completions, although this still implies large annual
falls in building and construction, with business spending on machinery and
equipment also set to decline further. Total investment spending in 2010 will
amount to only 12.5% of real GDP, less than half its share at the peak of the
boom in 2006. The depth of the Irish recession can therefore be seen as
primarily due to a collapse in capital spending, with the fall in consumer
outlays the other main factor.
Exports now account for over 90% of GDP, and
the accompanying growth of multinational profits will dampen GNP 9gros national
product), which is expected to contract by 1.5% this year. Uncertainties abound,
both domestic and international, but at this stage BoI still expects GDP to grow by 3% next
year, which is in line with the consensus view.
The pace of job losses has slowed and the
unemployment rate may be at or near the peak, with many unemployed non-Irish
nationals leaving the country, as employment is unlikely to rise until 2011.
Gross pay in Ireland did not fall as much as some expected and Ireland’s
experience of price deflation may be coming to a close - -- a return to positive
annual inflation is expected by year-end.
Finally, the underlying fiscal deficit (i.e.
excluding capital injections to Anglo and INBS) may emerge below the Budget
projection: tax receipts are broadly on target, capital spending is likely to
undershoot, debt service payments may be lower than projected and the Central
Bank surplus is running well above expectations. Moreover, fees for the 2010 ELG
guarantee on bank deposits is not included in the Budget arithmetic and may well
amount to around €1bn by year-end,
which is similar to the fees for the 2008 guarantee, which is incorporated.
BP CEO Tony Hayward may be
replaced in the wake of the Gulf oil Spill. James Barty from Arrowgrass Capital
Partners, Ralph Silva from Silva Research Network and Allister Heath from CityAM
EC/IBM: The European Commission has
decided to initiate formal antitrust investigations against IBM Corporation in
two separate cases of alleged infringements of EU antitrust rules related to the
abuse of a dominant market position. Both cases are related to IBM's conduct on
the market for mainframe computers. The first case follows complaints by
emulator software vendors T3 and Turbo Hercules, and focuses on IBM's alleged
tying of mainframe hardware to its mainframe operating system. The second is an
investigation begun on the Commission's own initiative of IBM's alleged
discriminatory behaviour towards competing suppliers of mainframe maintenance
says mainframes are powerful computers which are used by many large companies
and government institutions worldwide to store and process critical business
information. It is estimated that the vast majority of corporate data worldwide
resides on mainframes. In 2009 approximately €8.5bn worldwide and €3bn in the
European Economic Area were spent on new mainframe hardware and operating
is alleged to have engaged in illegal tying of its mainframe hardware products
to its dominant mainframe operating system. The complaints contend that the
tying shuts out providers of emulation
technology which could enable the users to run critical applications on non-IBM
addition, the Commission has concerns that IBM may have engaged in
anti-competitive practices with a view to foreclosing the market for maintenance
services (i.e. keeping potential competitors out of the market), in particular
by restricting or delaying access to spare parts for which IBM is the only
said the initiation of proceedings does not imply that the Commission has proof
of infringements. It only signifies that the Commission will further investigate
the cases as a matter of priority.
important thing about these tests is that you have higher transparency,"
Andrew Palmer from The Economist told CNBC after the EU's bank stress test
results. Yuwa Hendrick Wong from MasterCard Worldwide joined the discussion.
In New York
Monday, the Dow Jones rose 69 points or 0.67% to 10,494.
The S&P 500
rose 0.84% and the Nasdaq added 0.81%.
US sales of new single-family houses
in June 2010 were at a seasonally adjusted annual rate of 330,000, according to
estimates released jointly today by the US Census Bureau and the Department of
Housing and Urban Development. Although June sales rose, they were the second-lowest