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News : International Last Updated: Mar 28, 2011 - 8:14 AM


Markets News Friday: Oracle reports profits surge of 78% in fiscal Q3; Shannon electronics project may provide up to 300 jobs
By Finfacts Team
Mar 25, 2011 - 8:58 AM

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Silvio Berlusconi, Italian prime minister, looks unamused as he appears to be subject to a ribbing from Mari Kiviniemi, Finnish prime minister and Dalia Grybauskaitė, Lithuanian president, at the EU summit, Brussels, March 24, 2011. Maybe they're admiring his wig or joking about his upcoming trial on charges of underage sex?

Oracle: The US IT giant on Thursday reported that fiscal third-quarter profit surged 78% and all geographic areas reported revenue growth of 30% or higher.

Oracle has long been synonymous database systems and is now also selling server hardware after its $7.4bn acquisition of Sun Microsystems in early 2010.

“Strong revenue growth coupled with disciplined business management enabled an increase in non-GAAP operating margin to 44% and earnings per share to $0.54,” said Oracle President, Safra Catz. “Our hardware product gross margins increased to 55% in the quarter so we are now completely confident that we will exceed the $1.5bn profit goal we set for the overall Sun business for the current fiscal year.”

“Q3 performance was broad based with all geographies reporting revenue growth of 30% or higher,” said Oracle President, Mark Hurd. “The sequential revenue growth for Exadata and Exalogic was up over 50%. And we expect to see an even higher growth rate for these two game changing technologies in Q4.”

“In Q3 we signed several large hardware and software deals with some of the biggest names in cloud computing,” said Oracle CEO, Larry Ellison. “For example, Salesforce.com’s new multi-year contract enables them to continue building virtually all of their cloud services on top of the Oracle database and Oracle middleware. Oracle is the technology that powers the cloud.”

Results detail

Jobs in Shannon: It's expected that plans for up to 300 jobs to be created at a new electronics facility in Shannon, will be announced next month.

ZAGG, a US company that manufactures computer and related accessories, says its has grown from a backyard workshop to being a publicly-traded trendsetter with a team of over 200 employees and associates . Its invisibleSHIELD, which protects watch faces from scratches, has achieved over 7m unit sales

The company is reported to have has moved into a 30,000 square foot facility in the Shannon Industrial Estate, from where it will serve its customers in Europe, Asia and Africa.

A joint venture between Zagg and a local County Clare firm will  begin with 140 staff employed by the end of next year, and 300 by the end of 2014.

There is currently a political game, rather than a risk game being played in Europe says Klaudius Sobczyk, senior fund manager at Veritas Investment Trust:

Ireland: A pause in the export-led recovery: Davy economist, Conall Mac Coille comments - - "Yesterday's Irish GDP data were disappointing but have not led us to significantly change our view that the Irish economic recovery will continue to be export-led, with a very gradual recovery in domestic demand. As expected, consumer spending fell by 0.4% on the quarter following the declines in retail sales over the same period. The small contraction in investment spending was disappointing as it had been hoped that some of the sharp decline in Q3 may have been temporary. The Central Statistics Office drew attention to a sharp decline in investment in aircraft, and the picture is somewhat more favourable once that effect is removed.

De-stocking provided a large negative contribution to the growth figure in Q4 which was surprising given that companies built up their stocks in Q3 for the first time in two years. The decline in stocks may have reflected weak consumer spending and the collapse in confidence as the EU/IMF deal was negotiated. However, with stocks declining in every quarter from Q3 2008 to Q2 2010 there is probably limited room for further de-stocking by companies, and the negative impact on demand de-stocking would imply.

The big surprise was the decline in exports on the quarter by 1.4%. Strong global demand, positive survey data on Ireland's export prospects and most importantly, the CSO's own monthly data on goods exports pointed to robust export growth in Q4. The monthly goods export volumes numbers pointed to growth in excess of 10% in Q4 over Q3. However, in the national accounts released yesterday the CSO indicated that the volume of goods exports fell by 5.5% on the quarter. In the past, the monthly goods data has been a good guide to the final quarterly number.

So the discrepancy in Q4 is very surprising. The CSO indicated that this related to a statistical adjustment only applied to the quarterly data. But the statistical adjustment has never accounted for such a large discrepancy between the quarterly and monthly data. In short, it is hard to interpret the export data in yesterday's release. We have not changed our view that robust global demand, coupled with improvements in competitiveness, will lead to robust export growth in 2011.

Of course, current negotiations in Brussels to resolve the European debt crisis could also have a large impact on Ireland's economic prospects. The latest development in the negotiations appears to be a cut in the amount of capital allocated for the future emergency aid mechanism following pressure from Germany and a compromise on the issue that had been agreed on Monday. Suffice to say, the market is unlikely to be impressed with this type of chopping and changing and it raises concerns about the outcome of this round of EU negotiations."

Richard Yetsenga, global head, emerging market FX strategy at HSBC, shares his strategy for trading the euro:

Economic View: GDP data don’t help Ireland’s debt dynamics situation; Goodbody's chief economist, Dermot O’Leary, comments - - "With Ireland already in the firing line, yesterday’s confirmation of a seasonally-adjusted fall of 1.6% in GDP in Q4 2010 looked, at first glance, to provide another reason to write off the economy’s prospects.

Although the economy is weak, it is not nearly as weak as that headline number suggests. In fact, GNP increased by 2.0% in the quarter. So, which is the correct number? Once again, the volatile nature of the data can be attributed to the large multi-national presence in Ireland; exports and inventories subtracted from GDP (likely to be dominated by multi-nationals), while this meant there was lower profit outflows from those foreign multi-nationals (there was also an increase in profit repatriations from Irish companies abroad), thus contributing to a rise in GNP.

One can get confused with the volatility, but what does it all mean for the economy’s prospects in 2011. The data confirm once again that Ireland has a two-speed economy. Domestic demand continues to be weak, albeit in line with expectations, falling by 5.5% yoy in Q4 and 6.5% for the full year, as investment in particular continued to drag. That component of the economy has now fallen by 65% from the peak. On a more positive note, the export sector continues to perform very well. In the full-year, exports grew by 9.4%, with imports up by 6.6%.

We believe these trends will continue. Our previous forecasts suggested that GDP would grow by 1.1% in 2011, while GNP would be up by a neglible amount. On the basis of the weaker Q4 GDP result, we are likely to bring down our estimate for GDP growth to close to the GNP estimate. This only serves to underline the challenges that Ireland faces, but with bank stress tests due next week, the immediate concern is for debt sustainability. With growth being an important ingredient for debt sustainability, these figures simply don’t help."

Stocks are on a tear despite global unrest and rising commodity prices. What is driving this market? Laurence Fink, chairman and CEO, BlackRock, gives his perspective. BlackRock is assisting the Central Bank of Ireland with the current stress tests of Irish banks:

US Markets

In New York Thursday, the Dow rose 84 points or 0.70% to 12,171.

The S&P 500 added 0.93% and the Nasdaq advanced 1.41%.

Asia Markets

The MSCI Asia Pacific Index rose 0.7% Friday.

Japan's Nikkei 225 added 1.07%%; China's Shanghai Composite climbed 1.10%; Australia's S&P/ASX 200 Index rose 0.91% and the Bombay Stock Exchange's Sensex index gained 1.92% in Mumbai.

Asia benchmarks

Finfacts Reports

EU summit endorses reform measures; Portugal overshadows as Irish 10-year debt yield hits 10.2% - - Spain's at 5.2%
The Baroque Opera House Index: Why politicians should not reduce spending on culture in times of tight budgets
IMF reviews how it assesses risks/ prospects for economies and how it should “speak truth to power”
Ireland's An tSlí Ghlas -The Green Way - - becomes Irish representative of Global Cleantech Cluster Association
Markets News Afternoon: UK launches consultation on lowering corporate tax rate in Northern Ireland; WPP to move HQ back to UK
US durable goods orders tumbled in February; US new jobless benefit claims fell slightly last week
Irish Balance of Payments current account surplus rose to €1.40bn giving a deficit of just €1.11bn for 2010
Central Bank says Irish domestic banks’ foreign claims down 6.5% to €194bn in Q4 2010; UK and US account for 71%
Irish GDP fell 1% in 2010; GNP dipped 2.1%; GDP fell 1.6% in Q4 and GNP rose 2.0%
Eurozone growth remains close to four-and-a-half year high in March according to PMI survey data

In Europe, the Dow Jones Stoxx 600 is up 0.17% in early trading Friday.

The ISEQ has risen 0.60% in Dublin.

Both CRH has risen by 0.45%; Elan is down 1.52% IL&P is up 5.67%.

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 $1.4071 and at £0.8678.

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 Thursday this week, the BDI rose 18 points or 1.15% to 1,583.

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 $105.39 per barrel, down 21 cents from Thursday's close. In London, Brent for April delivery is trading on the International Commodities Exchange at $115.54. 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 almost $10.

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 $1,433.70, up $2.90 from Thursday's close.

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