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News : International Last Updated: Mar 3, 2011 - 7:19 AM


Markets News Wednesday: World's top 10 hedge funds earned $28bn for clients in H2 2010; Fyffes reports 2010 profit of €6.8m
By Finfacts Team
Mar 2, 2011 - 8:40 AM

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Hedge Funds: The world's top 10 hedge funds earned $28bn for their clients in the second half of 2010, the Financial Times reported Wednesday.

Data from hedge-fund investor LCH Investments show that the top 10 funds made $2bn more for their clients than the net profits of Goldman Sachs, JPMorgan, Citigroup, Morgan Stanley, Barclays and HSBC combined.

The 10 funds have generated a total of $182bn in profit since they were founded, the newspaper said.

The Wall Street Journal reported in January that hedge-fund manager John Paulson personally netted more than $5bn in profits in 2010 - - likely the largest one-year haul in investing history, trumping the nearly $4bn he made with his "short" bets against subprime mortgages in 2007.

He is reported to have made $32.2bn for his clients since he set up in 1994 while George Soros has made 35bn for his clients since setting up the Quantum Fund in 1973.

Paulson has 120 employees compared with 32,500 at Goldman Sachs.

The Journal explained that of the $5bn made in 2010 by Paulson, about $1bn came from the 20% performance fee that Paulson & Co. reaped from the approximately $5bn the hedge-fund firm generated for clients in 2010, as well as from management fees charged to clients of his $36bn firm. The remaining $4bn came from about $10bn of personal investments in his hedge funds, his investors say. Those holdings rose about 40%, or $4bn.

Fyffes: The Irish fruits importer and property group reported today a profit of €6.8m in 2010 compared with a loss of €45m in 2009.

Total revenue, including the group’s share of its joint ventures, was 2.1% higher in 2010 at €742.1m 

Adjusted EBITA for 2010 amounted to €21.3m, up 2.8% on the previous year. 

Commenting on the results, David McCann, chairman, said: “Fyffes is pleased to report an increase in its adjusted EBITA (Earnings Before Interest, Taxes, Depreciation and Amortization) for 2010 to €21.3m, ahead of previous expectations. Adjusted earnings per share for the year increased by 6%. In the context of the exceptionally difficult trading conditions which persisted in the banana category for much of the first half of the year, this result represents a very satisfactory outcome for 2010. Fyffes is proposing a 9.1% increase in its final dividend for 2010.

Trading conditions in the first two months of 2011 have been satisfactory. The Group is maintaining its current target EBITA range for the year of €17m-€22m.”

Results detail

Discussing the legal ramifications for Goldman in the latest SEC insider trading charges against former director Rajat Gupta, with CNBC's Bertha Coombs, and Tom Curran, Peckar & Abramson:

US: The House of Representatives on Tuesday approved a two-week budget bill just days ahead of a deadline that could result in many services of the federal government ceasing unless Congress agrees to a new funding measure. In a 335-91 vote, just six Republicans and 85 Democrats were opposed to the stopgap measure. It is now up to the Senate to take action.

Stock markets fall on higher oil prices: Davy economist, Conall Mac Coille, comments  -- "Brent oil prices rose to a high of $116.5 per barrel yesterday, from around $112 at the beginning of the day. In early trading this morning, Brent oil prices had fallen back to $115 per barrel and Asian stock prices had declined by a further 1%. Yesterday, the S&P 500 fell by 1.6% and the FTSE 100 and Euro Stoxx 50 by 1%.

The decline in stock prices came despite global purchasing manufacturing indices for manufacturing coming in above expectations. The US ISM manufacturing survey rose to 61.4, well ahead of the market's expectation for a reading of 61, and the highest level since 2004.

The impact on the global economy will largely depend upon how central banks respond to the upward impact on consumer price inflation from higher oil prices. In testimony to the Senate Banking Committee yesterday, Federal Reserve chairman Ben Bernanke indicated that monetary policy should not be tightened in response to higher oil prices. In particular, Bernanke reiterated his view that rising oil and commodity prices will not cause a permanent rise in inflation when labour costs remain muted. So at least in the US a tightening of monetary policy does not look likely in the immediate future.

However, with inflation already above the 2% target, the ECB may be more likely to respond. The euro area unemployment rate fell slightly to 9.9% in January from 10% in the previous month, and the market expects that output price inflation data released today will indicate that prices rose by 5.7% in the year to January. And comments from ECB council members have been less dovish than their counterparts in the US. So for now stock markets are likely to remain highly focused on events in the Middle East and global oil prices."

Mohamed El-Erian, of trillion-dollar bond fund manager, PIMCO, where he is CEO & co-CIO, shares his thoughts on the Middle East unrest and its impact on global markets. He was born in Egypt, :

Economic View: Stronger growth + higher inflation = a more hawkish ECB: Goodbody chief economist, Dermot O’Leary, comments - - "Ahead of the ECB Governing Council meeting tomorrow, recent data have definitively put the bias to the upside for ECB rates. At the first ECB meeting of the year, President Trichet pointed to the fact that inflation risks may move to the upside. Despite continued upward prices pressures throughout January, the market was somewhat surprised that the inflation rhetoric was not strengthened at the February meeting.

We would be very surprised if there were not tougher warnings on inflation at tomorrow’s press conference. The ECB will also have updated staff economic projections to base their opinions.

They will reveal higher growth and inflation expectations. As a foretaste of this, the European Commission published its latest projections yesterday; it now expects euro-area economy to grow by 1.6% in 2011 (up from 1.5% previously), while inflation is expected to average above the ECB’s target at 2.2% (up from 1.8%).

Data released yesterday only supports this upward bias: (1) Inflation was confirmed at 2.4% in January (although core inflation remains low at 1.1%); (2) manufacturing PMIs in Germany, France and Italy all rose, while growth in manufacturing activity in the euro-area as a whole is at a ten-year high, and (3) German unemployment fell to its lowest level since 1991. We recently changed our call on ECB rates in reflection of the increased inflation concerns. Although we don’t expect the first increase (of two 25bps hikes this year) until September, there is likely to be a noticeable change in tone at tomorrow’s briefing."

US Markets

The Dow fell 168 points or 1.38% in New York Tuesday, to 12,058.

The S&P 500 slid 1.57% and the Nasdaq slipped 1.61%.

Asia Markets

The MSCI Asia Pacific Index of shares dropped 1.5% Wednesday - - its first loss in four days.

Japan's Nikkei 225 declined 2.43%; the China's Shanghai Composite dipped 0.18%; Australia's S&P/ASX 200 Index fell 0.48% and the Bombay Stock Exchange was closed for a public holiday.

Asia benchmarks

Finfacts Reports

Eurozone's recovery gaining ground; European Central Bank may keep benchmark rate unchanged until early 2012
Global gas glut unhinges natural gas and crude oil prices
Dr. Peter Morici: Striking a balance; US unions and the public interest
Global Manufacturing PMI at near-record high in February
Glanbia reports excellent year in 2010 with operating profit rising 23% to €136.5m
Irish Life & Permanent reports operating loss of €197m in 2010
Markets News Afternoon: European Court of Justice sex discrimination ruling on insurance contracts will likely result in rate hikes for women
US manufacturing had its best monthly performance in February since May 2004; Construction spending dipped in January
Independent report shows FF/PD governments ignored timid warnings of Ireland's Department of Finance
Ulster Bank says rate hikes on the way as the Bank of England and European Central Bank prepare to pull the trigger
Eurozone annual inflation is expected to be 2.4% in February 2011
Eurozone unemployment rate fell to 9.9% in January 2011; Netherlands/ Austria lowest at 4.3%; Spain highest at 20.4%
Eurozone manufacturing PMI at near 11-year peak in February; Input costs rise at record rates in almost all nations

In Europe, the Dow Jones Stoxx 600 is down 0.60% in early trading Wednesday.

The ISEQ has fallen 0.72% in Dublin.

CRH is down 1.32% and Elan has fallen 0.84%.

Reporting companies: IL&P is down 3.85%; Glanbia is up 1.14% - -  see report links for the 2 companies in Box above; Fyffes has dipped 3.89%.

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 $1.3766 and at £0.8480.

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 11 points or 0.88% to 1,262.

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 April 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $99.89 per barrel, up 26 cents from Tuesday's close. In London, Brent for April delivery is trading on the International Commodities Exchange at $115.38. 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 at $15.

The FT said in early February 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 $1,428.60, down $4.60 from Tuesday's close.

Irish Financials; Governor comments on national television: Goodbody's Eamonn Hughes  comments  -- "The Central Bank Governor, Patrick Honohan appeared on one of the main current affairs programmes on local TV last evening. Besides indicating that default is not an option for Ireland, he appeared to lay out an argument that the exposure of European banks/ECB to the Irish banks meant that we all had a shared agenda ahead, without being specific.

In fact, he added that our role in taking on the liabilities of Anglo Irish meant that we spared Europe of its own 'European Lehmans' collapse, so that could be a factor for garnering some goodwill in Brussels. He indicated there could be some progress on the interest rate charged on our bailout, but that it was up to the incoming government to get its strategy in order prior to engaging with the EU on these and other matters in the weeks and months ahead.

On specific issues on the banks, he highlighted that the stress tests are due by the month end and that there are risks that the €10bn capital figure estimated to be immediately required for the banks in the EU/IMF bailout last November could be higher. However, that will be no surprise to most people. It sounds like the PCAR/PLAR will be run concurrently with evaluation of the bank’s de-leveraging plans, which is helpful.

However, he appeared pretty adamant that there would be no firesale disposals and it appeared that banks would be given time. The question is whether the EU/ECB - and just as importantly, the debt markets - give them the time, but as the scale of the problem mounts, the authorities have to be more flexible in their approach. However, with existing plans already quite dilutive, the possibility of higher capital targets through the PCAR - as we have been highlighting for months - compounds the issue for existing equity holders. There is still too much uncertainty here to show much interest in valuations."

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