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News : International Last Updated: Oct 6, 2010 - 12:01:48 PM


Markets News Afternoon: US services activity rises; ECB ramped up bond-buying last week; Rogue trader Kerviel gets jail and €4.9bn fine
By Finfacts Team
Oct 5, 2010 - 4:10:11 PM

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Service companies in the US grew at a faster pace than expected in September, signalling that the economic recovery is picking up heading into the fourth quarter.

Economic activity in the non-manufacturing sector grew in September for the ninth consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business.

Anthony Nieves, chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Worldwide said: "The NMI (Non-Manufacturing Index) registered 53.2% in September, 1.7 percentage points higher than the 51.5% registered in August, indicating continued growth in the non-manufacturing sector at a faster rate.

The Non-Manufacturing Business Activity Index decreased 1.6%age points to 52.8%, reflecting growth for the 10th consecutive month, but at a slower rate than in August. The New Orders Index increased 2.5 percentage points to 54.9%, and the Employment Index increased 2%age points to 50.2%, indicating growth in employment for the third time in the last five months.

The Prices Index decreased 0.2 percentage point to 60.1%, indicating that prices increased in September at a slightly slower rate. According to the NMI, 11 non-manufacturing industries reported growth in September. Respondents' comments continue to be mixed about business conditions, with a slight majority reflecting optimism."

Société Générale: In Paris today former foreign exchange trader Jérôme Kerviel was sentenced to three years in jail and ordered to pay €4.9bn  in damages to French bank Société Générale, his former employer, for putting it at risk of collapse in 2007/2008 when he engaged in a scheme that became the world’s biggest rogue trading scandal.

“By his deliberate actions, he put in peril the existence of the bank that employed 140,000 people, of which he was a part, and whose future was threatened,” the judge Dominique Pauthe said.

The fine was equivalent to the loss to the bank.

SocGen says it has since spent €130m tightening up its controls.

Kerviel's lawyer Olivier Metzner had had argued that his client was a country boy from Brittany who had been corrupted by the bank, saying he had been “formed and deformed” in the “virtual” world of the bank's glass towers where “numbers had no meaning”.

Ex-trader Jérôme  Kerviel is sentenced to prison, reports CNBC's Stephane Pedrazzi:

ECB Bond Buying: The European Central Bank level of participation in the bond markets in recent weeks when the spreads on Irish and Portuguese sovereign bonds hit record highs.

The ECB extracted €1.4bn from the market by attracting this amount in deposits to offset government bond purchases.

The amount last week was about 10 times normal weekly rates.

Analysts at Italian bank UniCredit analysts said the ECB "has likely bought €2.2bn in Irish bonds (around 80% of its total purchases) since early August."

The programme in early following the agreement of Eurozone leaders on a bailout mechanism for member counties.

When the programme started, weekly purchases purchases were as high as 16.5bn before tapering off until the reigniting of the sovereign debt crisis.

A recent Harvard study highlights the ratio of average CEO pay to average worker pay, with Michael Hiltzik, Los Angeles Times, and Katherine Mangu-Ward, Reason Magazine:

IBEC: Employers' group IBEC said today the priority for the December Budget must be growth and jobs as only through growth and jobs that the budget deficit be fixed.

Launching its pre-Budget submission, IBEC's director general Danny McCoy said it is essential that the Government does not overtax the country's fledgling economic recovery.

"The bulk of the adjustment must come in the form of current expenditure reductions. The most the economy can bear in tax increases is €600m in 2011," he said.

In its Budget submission, IBEC says that plans for a property tax should be advanced as quickly as possible and the existing tax on second homes should be doubled.

It also says that the income tax base will need to be broadened so as to bring more people into the tax net. But it warned that there is no further scope to increase the marginal rate of income tax and points out that these rates are already very high by international standards.

Delta Index:  Delta Index, the Irish financial trading/spread betting company, reported today that it reached profitability in the first half of 2010, following a €4m investment in its online trading platform and staffing over the last few years. The company, which made a loss of €630,000 last year and €950,000 in 2008, reached profitability for the six months to July 2010.

Delta Index also announced that following a major technology investment programme, it is now positioned to mount a significant expansion into the UK and German financial spread betting markets which are estimated to be worth in excess of €400m. The company, which employs 30 people, currently generates about 10% of its revenue overseas and aims to grow this to 50% by the end of 2012.

Conor O’Neill, joint managing director of Delta Index, points out that the Irish financial spread betting market is worth about €8 -10m. “We are targeting a bigger slice of the UK market which is worth an estimated €350m and Germany which is worth €115m.”

In the UK, following recent changes in legislation which allow pension funds to invest in CFDs (Contracts for Difference), Delta will be offering a new CFD pension product. Conor O’Neill says that this has the potential to grow into a billion Euro market.

Delta Index has maintained its revenues over the last three years and will shortly report 2009 revenues of €3.1m.

Turbulent markets have been good for us as, unlike stockbroker clients investing in equities, our clients can benefit from downturns in markets as well as ups.”

He added, “It is becoming more accepted to have a portion of your wealth portfolio in financial spread betting. This is reflected in the fact that the UK allows a CFD, a form of financial spread betting, to be part of a personal pension portfolio.”

Financial spread betting allows clients to trade in a variety of financial instruments from equities and stock market indices to commodities and currencies. Unlike traditional purchase of equities through a stockbroker or bank, financial spread betting allows clients to profit when markets go down as well as up.

Ryanair called today for the EU Commission to remove the ‘right to strike’ from essential air transport services such as ATC (air traffic control) and to reform the EU261 passenger rights legislation which has again been shown to be unfit for purpose during last week’s ATC strikes in Belgium, France and Spain.

So far in 2010, Ryanair has been forced to cancel 1,400 flights and delay over 12,000 other flights, disrupting over 2.5m passengers, as a direct result of Belgian, French and Spanish ATC strikes and work to rules. Ryanair said under EU261 regulations airlines suffer the costs of these disruptions without any recourse against those unions calling strikes or the EU governments who own the ATCs and repeatedly allow European airspace to be closed. Ryanair will now take legal action again Belgocontrol following the wildcat strikes in Belgium last Tuesday, which caused the cancelation of over 90 Ryanair flights, disrupting over 15,000 passengers.

US Markets

In New York Tuesday, the Dow is up 163 points or 1.52% to 10,914.

The S&P 500 rose 1.79% and the Nasdaq added 2.07%,

Live US Indices

European Markets

The pan-European Dow Jones Stoxx 600 is up 1.33% Tuesday.

In Dublin the ISEQ is up 1.15%.

CRH is up 2.53%; Elan has dipped 1.91%; BoI has added 1.37%.

European benchmarks

Irish share prices

Euribor Interest Rates

Commodities

Crude oil for November 2010 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $82.52 barrel, up $1.08 from Monday's close. In London, Brent for November delivery is trading on the International Commodities Exchange at $84.05.

Currencies

The euro is trading at $1.3838 and at £0.8695.


© Copyright 2010 by Finfacts.com

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