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Japanese television shows members of the Self-Defence Force in the devastated earthquake zone.
Bank of Japan: Japan’s central bank on Monday injected a record ¥15trn
yen ($183bn) into money markets and eased monetary policy, while the Tokyo stock
market slumped Monday after Friday's devastating earthquake and tsunami.
The central bank said: "Japan's economy
is emerging from the current deceleration phase. The year-on-year rate of
decline in the CPI (excluding fresh food) has continued to slow. The Bank has
maintained its baseline scenario that Japan's economy is expected to return to a
moderate recovery path.
The year-on-year rate of change in
the CPI is expected to become slightly positive in the near future. However, the damage of the
earthquake has been geographically widespread, and thus, for the time being,
production is likely to decline and there is also concern that the sentiment of
firms and households might deteriorate."
Shares in Tokyo tumbled over 6% on Monday with the Nikkei 225 index slumping
below 10,000, down 626 points at 9,628.
Aryzta,: The Irish-Swiss food group formed by a merger in 2008 of IAWS
and Swiss bakery group Heistand, today reported sales for the six months to the
end of January rose by 36% to €1.89bn.
Group earnings before interest and tax, jumped by 52% to €173.1m while earnings
per share rose by 34% to 140.3 cent.
Goodbody's Liam Igoe commented: "Aryzta's results this morning were well ahead of our forecasts at adjusted EPS
level, with EPS of 140.3c nearly 10c ahead of our estimate. Most of this
differential may be to do with the timing of profits in the acquisitions (esp.
FSB) between H1 and H2. Arytza is maintaining its full year guidance at 300c
(our forecast 305.9c). Some recovery in most of its markets is evident in Q2. The company quotes lfl revenue only, though we believe that volume
growth is evident in Continental Europe (especially France and Germany), quite
strong in North America and, obviously, very strong in the rest of the world.
Pricing was the other key feature that was evident in the results. The company
has estimated that, based on current commodity price levels, double digit price
inflation will be necessary.
This is already being passed on to its customers,
though it was in the latter part of Q2 that it commenced in earnest. Food Europe
saw modest lfl revenue growth of 0.6% in Q2. Within this, Ireland / UK remain
weak, with consumers remaining under pressure, especially in Ireland where
emigration is literally shrinking its customer base. However, volumes appear to
be stabilising. Growth has resumed in continental Europe (was also evident at
end of Q1). In Food North America, lfl sales were up strongly (we estimate
+5.6%) and most of this, we understand, was volume growth, driven by a return of
growth to the high street and some segments of the food service (top end
restaurants and QSR).
Following Origin’s better than expected interims results
on Thursday, we increased our FY11 forecast EPS from 36.2c to 41c (+13%).
Two-thirds of this upgrade was due to the acquisitions of United Agri Products
and Rigby Taylor for a combined cost of Stg£47m. Even excluding these
acquisitions, however, the company’s core agri-services businesses are showing
growth, with 8% volume increases in H1, though some of this is to do with timing
of some sales coming into this period (e.g. forward buying of fertilisers by
farmers due to rising prices). For FY12, we are increasing EPS by 9% to 43.4c.
Net debt (including hybrid as debt) was higher than we had forecast, but we
expect this was timing of working capital of the acquisitions, and our full-year
estimate (€1.4bn) is unlikely to change materially. At first glance, we are
unlikely to make significant changes to our forecasts. In H2 the key issues
include: (i) the pass-through of cost inflation; (ii) the impact this might have
on volumes; and, (iii) the impact of acquisition synergies flowing through."
Noriyuki Shikata, Japan Prime Minister's Office's spokesperson, updates us on the latest at the country's troubled Fukushima Daiichi nuclear plant, where a hydrogen explosion happened earlier today:
Economic View: Ireland left out in the cold?
economist, Dermot O’Leary, comments - - "We have known for some time, based on rhetoric from European politicians that
Ireland would have to meet strict conditions if it was to get an improvement in
the terms of the loan package from its European “partners”. On Friday, European
leaders backed up these words with action for the first time.
While Greece was
granted a 1% reduction on its aid package and a lengthening of its loan term in
return for agreeing to sell off €50bn of state assets, Ireland refused to yield
to demands on its corporation tax regime in return for a 1% reduction in its
loan package. Correctly, this was seen as too big a price to pay.
statements following the early Saturday morning break-up of the meeting, French
President Sarkozy seems to be the strongest critic of Ireland’s stance and is
reported to have asked for a “gesture” from the Irish Taoiseach Enda Kenny on
the corporation tax issue (despite the fact that the effective corporation tax
rate in France is lower than in Ireland). We noted on Friday that there were two
immovable forces going into the summit and that proved to be the case. As a
result, Ireland seems to be left out in the cold and in a very difficult
position given that the “Pact for the Euro” agreed in principle at the summit
will continue regardless.
Some important decisions were indeed agreed that markets will be pleased with.
For example, it was agreed that the lending capacity of the EFSF will indeed be
increased to its original €440bn, while its successor – the European Stability
Mechanism – will have a lending capacity of €500bn. Both facilities will be
allowed to intervene in primary markets for government debt.
The interest rates
charged on these facilities will be in line with the pricing mechanism of the
IMF (i.e. lower rates). Agreement has also been made in principle on issues such
as monitoring competitiveness developments, national fiscal rules and national
legislation for banking resolution. A quantitative target of 1/60th of the
difference between the government debt level and the 60% limit was also agreed.
This means that if a country has a debt level of 120% of GDP, fiscal
consolidation of 3% of GDP must be targeted. Given that Ireland’s debt level is
fast approaching this level, particularly if all of the €35bn in funding for the
banks is required; this gives an idea of the scale of the fiscal consolidation
task, even beyond 2015.
Finance Minister Noonan will meet his European peers
today to thrash out further the main points from Friday’s summit. He is also
expected to push for a change in the way in which the banking sector is being
rehabilitated, including a request for further assistance at European level. We
have said before that this European support is required, as Ireland can no
longer deal with the banking crisis on its own. After Friday’s summit, this
looks like an even bigger task."
"It's quite striking how complex civilizations can fall apart really, really quickly... we seem at the moment, bombarded by shock events," Niall Ferguson, Professor of History at Harvard University and author of 'The Ascent of Money' told CNBC on Western civilization:
Japanese stock markets collapse despite policy action: Davy
economist, Conall Mac Coille, commented - - "The Nikkei 225 fell by
6.2% in the first trading following the earthquake over the weekend,
and the collapse in share prices came despite the Bank of Japan
making asset purchases of ¥15tn ($183bn). The Bank of
Japan also indicated that it plans to expand its existing programme
of asset purchases and provide further injections of liquidity to stabilise markets.
The damage over the weekend will surely mean that, following
negative growth in Q4, gross domestic product is likely to contract
in Q1 also so that the Japanese economy will technically be in
recession. Of course, this decline will reflect the temporary impact
of the earthquake damage on production lines within factories. But
by preventing asset prices from falling further, the Bank of Japan
aims to prevent consumer and investor confidence from deteriorating.
Unfortunately, Japan is already in a perilous fiscal situation.
Today Moody's said that at some point Japan may reach a "tipping
point" in terms of its fiscal position following news that the Prime
Minister is planning a supplemental budget to pay for
reconstruction. So today's earthquake comes at a particularly bad
time for the Japanese economy.
Investors will now look to the European and US stock markets to
see the knock-on impact of the events in Japan. US and European
stock index futures fell in early Asian trading this morning. So
there may be downward pressure on stock prices when the US and
European markets open today."
MSCI Asia Pacific Index of shares slumped 2.8% Monday.
Japan's Nikkei 225 tumbled 6.18%; China's Shanghai Composite rose 0.13%;
Australia's S&P/ASX 200 Index slid 0.40% and the Bombay Stock Exchange's Sensex
index climbed 1.01% .
Europe, the Dow Jones Stoxx 600 is down 0.68% in early trading Monday.
ISEQ has dipped 0.45% in Dublin.
is up 0.13%; Elan is down 1.97% and Arytza fell 1.19%. No change on ICG.
Stephen Furlong commented today on 2010 results from Irish Continental Group:
"ICG delivered a strong set of results in 2010 with EBITDA up 5.7% to €53.6m and
basic EPS of 156.8c, up 53.1%. Key factors in the results included a strong
performance from the passenger side of the business, where revenue was up 12.3%,
and the profit on the sale of the vessel Bilbao (€9.4m), partially offset by a
weakness in the freight side of the business due to the sharp reduction in
economic activity in Ireland over the last number of years and the effects of
ship overcapacity in the market." See full
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.
Thursday, July 15, 2010, the index fell for the 35th straight session, by 9
points, or 0.537%, to 1,700 points,
On Friday July16th, the BDI rose 20
points or 1.12% to 1,700 to break the 35-session losing streak.
Friday last week, the BDI rose 24 points or 1.56% to 1,562.
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.
margin between the US benchmark WTI (West Texas Intermediate) used on the New
York Mercantile Exchange and Brent is almost $13.
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
to cut the stock overhang in Cushing, the price dislocation
“may persist for months [or years] to come”.
spot price of an oz of gold is trading in New York at $1,424.30, up $4.70 from
Financials; PCAR results to show additional capital requirements?
Goodbody's Eamonn Hughes comments - - "Press reports over the weekend speculate that the Irish banks may need between
€15-25bn of additional capital, on top of the original €10bn earmarked for them
in last November’s bailout plan.
The plan at that stage provided for up to €25bn
of contingency funds available for the banks and speculation is mounting that
the bulk, if not all, of these funds will be required in the upcoming PCAR
(capital) and PLAR (liquidity) reviews. The press comments indicate that the
tests aren’t finished yet and that the incoming new Finance Minister will
receive a report on them next week.
We would wonder how willing the new Finance
Minister will be to move on the capital front so soon into his brief. Additional
press reports this morning highlight that buy to let loans (over one-third of
the mortgage books) are receiving the highest scrutiny in the stress tests. We
have been highlighting our belief for months that the capital figures of €10bn
last November was insufficient to fill capital gaps at the banks and we were of
the view that the PCAR/PLAR would throw up additional requirements. This now
looks like it is coming to pass, though obviously the final determination on the
quantity is awaited."