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News : International Last Updated: Feb 17, 2011 - 8:08 AM


Markets News Wednesday: French drugs company Sanofi-aventis to acquire US biotech firm Genzyme; Dell triples quarterly profit
By Finfacts Team
Feb 16, 2011 - 9:40 AM

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European Economic and Monetary Affairs commissioner, Olli REHN, (left) with his compatriot, Jyrki Katainen, Finnish Deputy Prime Minister and Minister for Finance, at the Ecofin meeting of EU finance ministers, Brussels, Feb 15, 2011.

Finland could face up to 6,000 job cuts following the world's biggest mobile phone device firm Nokia’s alliance with Microsoft. Nokia has a payroll of 20,000 in its home country with over 6,000 working in research and development.

Dell: Dell, the world's No 3 biggest PC brand, on Tuesday reported that its quarterly profit nearly tripled on strong business sales and lower component costs.

Shares in the Texas company,  that has struggled in recent years, jumped 5% in after hours trading with analysts reacting positively to advances made in the market for data centers. The company said it expects to keep making deals in a bid to double sales from the data-center business to $30bn.

For the quarter ended Jan. 28, Dell's earnings rose to $927 million, or 48 cents a share, up from $334 million, or 17 cents a share, in the same period a year earlier. The profit rise outpaced the PC maker's revenue, which increased 5% to $15.7bn from a year earlier.

Dell said the company said it benefited from lower costs of components such as LCD screens and memory chips and it also gained from its sales to corporate customers, which are Dell's biggest clients.

UK Consumer Confidence: The Nationwide index of UK sentiment dipped 7 points to 47, almost erasing the 8-point gain in December, the mortgage lender reported today.

Consumers' confidence in spending fell at its fastest rate on record during January following the VAT hike to 20% and rising consumer prices.

Nationwide's spending index fell by 20 points during the month to stand at 70, the lowest level since November 2008 when the UK was in recession, and the sharpest drop recorded since the index was launched in 2004.

Just over half of people thought it was a bad time to make a major purchase, while 22% also thought it was a bad time to buy household goods, up from just 15% in December.

US Homebuilder confidence index still points to a subdued recovery: Goodbody's Robert Eason commented: "The US Housebuilder Confidence index came in at 16 for January, representing the fourth consecutive month at this level. While the index is off the lows (8-9) reached in Q408/Q109, the index has been pretty much range bound ever since, with 22 being the highest reading and 13 the lowest. As a result, we still believe that the pace of any recovery in the housing market will be subdued and that there is a risk that recent guidance given by companies on the housing market could prove too optimistic. Our forecasts for CRH only factor in a 5% increase in the US housing market in FY11."

President Obama sheds insight on his new budget plan, Egypt and more; Pt 4 of press conference:

Sanofi-aventis/Genzyme: French pharmaceutical company Sanofi-aventis and US biotech firm Genzyme announced today that they have entered into a definitive agreement under which Sanofi-aventis is to acquire Genzyme for $74.00 per share in cash, or approximately $20.1bn. In addition to the cash payment, each Genzyme shareholder will receive one Contingent Value Right (CVR) for each share they own, entitling the holder to receive additional cash payments if specified milestones related to Lemtrada (alemtuzumab MS) are achieved over time or a milestone related to production volumes in 2011 for drugs  Cerezyme and Fabrazyme is achieved.

Sanofi-aventis, a leading global pharmaceutical company and one of the world's leading biotechnology companies, Genzyme dates from 1981, and now has approximately 10,000 employees in locations spanning the globe.

There are 500 Irish workers on the Genzyme team at a biotechnology campus in Waterford where the company established its Irish operations in 2001. Seven key products in the Genzyme portfolio are shipped from Waterford to patients in more than 60 countries worldwide.

UK CPI inflation rises to 4%; Davy economist, Conall Mac Coille, comments  -- "Speculation that the Bank of England will be forced into raising interest rates has intensified following the news yesterday (February 15th) that CPI inflation in January was 4%, well above the 2% target of the Monetary Policy Committee (MPC). The CPI inflation out-turn forced Governor Mervyn King to write a further letter to Chancellor George Osborne explaining the strength of inflation.

Overall, there was little change in substance from previous letters with the Governor reiterating his view that the current strength of inflation was due to the increase in value added tax rates, energy prices and the gradual pass-through from the low level of sterling into import prices and CPI. Indeed, the 4% CPI inflation came as no surprise to the market and had been well flagged in advance in recent speeches by MPC members. The key question is where CPI inflation will be in 12 months' time.

There have been stark differences in the commentary on the Governor's letter. Some media outlets have interpreted the letter as a signal by the bank that rate rises are likely in the future. This seems unlikely as the Governor's letter indicated there were strong differences in view on the MPC about the outlook for inflation. So, given these contrasting views, it would be very difficult for the bank to provide any clear signal to the market about the outlook for the policy rate. Other commentators suggested that the letter reinforced the Governor's view that the current strength of inflation was temporary and that rate rises were not required.

Greater clarity will hopefully be provided by today's Inflation Report press conference, where Mervyn King will explain the bank's latest projection for CPI inflation over the next three years. In addition, labour market data for the UK released this morning should show that inflationary pressures emanating from the labour market remain weak."

The unemployment rate is expected to remain at its current high rate of 7.9% and average earnings growth to fall back slightly to 2.0%, well below pre-recession rates of around 5%. Furthermore, the Nationwide measure of consumer confidence released early today fell sharply to a reading of 47, a similar level to those during the worst of the financial crisis. So today's data releases will underline the fragile recovery in the UK against the backdrop of high CPI inflation rates, which together provide a challenging environment for the MPC to formulate monetary policy."

Randall Stephenson, chairman & ceo of AT&T joined CNBC at the Mobile World Congress in Barcelona and said mobile broadband and cloud computing were presenting huge business opportunities for the industry. He called for more interoperability among network providers:

Economic View 1: EU not prepared to move on senior debt; Goodbody economist, Juliet Tennent, comments  -- "The European Union appears to be standing firm in relation to its stance on senior bondholders. At the time of the IMF/EU bailout negotiations, Europe is widely believed to have refused to entertain the notion of restructuring the senior debt of the Irish Banks and comments from Minister Lenihan that there is 'shock' among EU finance ministers at the possibility of any restructuring of Irish bank debt suggests that that opinions have not softened in this regard.

In fact, the Europeans see the whole debate as damaging to confidence. Instead, talks now seem to be focusing on downsizing the Irish banking system by selling some €100bn of assets. This, it is hoped, would reduce the Irish banks dependence on funding from the ECB and Irish Central Bank. It would also have a considerable effect on the size of the Irish banks, both in terms of assets and employment. It also raises the possibility of further capital requirements as investors are likely to buy loans at a discount and/or be compensated for later losses."

Economic View 2: Soaring inflation puts pressure on the Bank of England; Juliet Tennent also said  - - "The Governor of the Bank of England, Mervyn King, was forced to write to the Chancellor George Osborne again this month when data showed that January CPI soared to 4% yoy, well above the 2% target rate.

Inflation has proved to be very sticky in the UK and January is the fourteenth month in a row that it exceeded the 2% target. Past weakness in Sterling, the VAT hike and rising commodity prices were all contributory factors. While the number was in line with expectations, the hawkish tone of the resulting letter, which suggested that inflation could rise to 5% in the next few months, has increased speculation that the UK is in line for a rate hike sooner rather than later.

Indeed, Mervyn King seemed to endorse market expectations of a May/June rate hike by stating in his letter that if rates rise as the market expects then inflation is as likely to be above target as below in the next two to three years. Governor King also referred to the fact that there is significant differences amongst the views of the Monetary Policy Committee about the risks to the outlook (there has been a 3 way split in the committee since last October) and warned that when the balance of risks require it the Committee will act accordingly.

The minutes of last week’s meeting (released 23rd Feb) will make for interesting reading. The hawkish tone is also expected to be reflected in this morning’s Inflation Report where inflation expectations are set to be revised upwards in line with those outlined in yesterday’s letter."

US Markets

In New York Tuesday, the Dow fell 42 points or 0.34% to 12,226.

The S&P 500 slid 0.32% and the Nasdaq slipped 0.46%.

Asia Markets

The MSCI Asia Pacific rose 0.2% Wednesday.

Japan's Nikkei 225 climbed 0.57%; China's Shanghai Composite rose 0.85%; Australia's S&P/ASX 200 Index dipped 0.02% and India's Sensex gained 0.12%.

Asia benchmarks

Finfacts Reports

Rehn says EU finance ministers have 'simply no appetite' for Irish bank senior bondholder 'haircuts'
Jobs at Irish venture capital backed firms rising at annual rate of 18.6%; Funds will run out of money by 2012
Investors more bullish towards global equities than at any time in past decade
US economists revise up 2011 economic growth forecasts
Irish General Election 2011: A business manifesto that is not special pleading for favours
Markets News Afternoon: Deutsche Börse merges with New York Stock Exchange; OECD area unemployment rate fell to 8.5% in December
Germany had €140.3bn trade surplus in 2010 followed by Ireland at €40.3bn; United Kingdom had largest deficit at -€105.4bn
US retail sales rose in January for the seventh straight month; US import prices rose sharply in month
UK Consumer Prices Index rose to 4% in January boosted by VAT hike and surging oil prices
ZEW Indicator of Economic Sentiment for Germany almost unchanged in February 2011
Eurozone GDP up by 0.3% and EU27 GDP up by 0.2% in fourth quarter of 2010 - - up 1.7% in 2010 in both zones

In Europe, the Dow Jones Stoxx 600 is up 0.14% in early trading Wednesday.

The ISEQ has risen 0.13% in Dublin.

CRH fell 0.61%; Elan is up 0.10%; BoI has risen 1.86%.

European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.3550 and at £0.8388.

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.

Commodities

The Baltic Dry Index, a measure of shipping costs for dry commodities, hit an all-time High of 11,771 on the 21st of May, 2008. From that time it reversed and on the 5th of December, 2008 it hit a low of 663 - - close to a 1986 low.

The BDI closed at 3,005 on Thursday, Dec 31st - - a rise of 289% in 2009. The index averaged 59% lower in 2009 than a year earlier.

On Thursday, July 15, 2010, the index  fell for the 35th straight session, by 9 points, or 0.537%, to 1,700 points, Bloomberg report.

On Friday July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session losing streak.

On Tuesday this week, the BDI rose 30 points or 2.49% to 1,236.

The Financial Times reported earlier in January, that Australia’s flooding and fears of ship oversupply has pushed down a gauge of the cost of hiring ships to carry coal, iron ore and other dry bulk by nearly half since October to the lowest level since the aftermath of the financial crisis. The Baltic Dry index, the widely watched measure of dry bulk charter rates, fell to 1,453, nearly half the 2,784 peak reached on October 27, 2010.

Crude oil for March 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $84.87 per barrel, up 55 cents from Tuesday's close. In London, Brent for March delivery is trading on the International Commodities Exchange at $102.34. The North Sea benchmark accounts for two-thirds of the global market.

The margin between the US benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange and Brent is over $17 a barrel.

The FT said last Friday that a surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America’s pipeline system, has depressed the value of the benchmark against other yardsticks. The International Energy Agency said on Thursday that with “few relief valves” to cut the stock overhang in Cushing, the price dislocation “may persist for months [or years] to come”.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,377.10, up $3.80 from Tuesday's close.

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