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Japan: The Japanese government has downgraded its assessment
of the economy for the first time in six months, citing the impact
of the March 11th earthquake and tsunami.
The government's latest monthly report was issued after a meeting of
ministers on Wednesday.
The report says the downgrade is due to a dip in industrial
production caused by supply chain delays and the rotating blackouts
implemented by the Tokyo Electric Power Company (TEPC0), the
operator of the stricken nuclear plant, following the massive
earthquake. The report expressed concern over a resulting decline in
The disaster also had a negative effect on consumer spending. Car
and department store sales fell due to product shortages and
dampened consumer sentiment.
The report concludes that the economy is showing some signs of
weakness. This is a downward revision from the March report which
said that although the economy was only "weakly self-sustaining"
it was "starting to pick up."
The report says signs of weakness will be seen for a while, but the
economy is expected to improve as production recovers. It warns the
risk of further deterioration remains as long as threats to power
On Tuesday, Japan's nuclear regulator raised the
severity of the Fukushima nuclear disaster two notches on the official scale to
the top level of 7, equivalent to the 1986 calamity at Chernobyl.
Economic View 1: More fiscal adjustment looming for Ireland; Goodbody
economist, Juliet Tennent, comments - - "According to the IMF’s latest
fiscal monitor, published yesterday, Ireland may face a longer fiscal adjustment
period than previously expected. The IMF is now forecasting that Ireland’s
deficit will be 10.8% in 2011, which is close to our own estimate of 10.4%, and
not the current Government forecast of 9.4%.
In addition, the deficit will still be above the 3% target in 2016 and not
reached by 2015, as laid out in the Programme for Government. This follows the
IMF’s downgrade to Irish GDP growth to 0.5% earlier in the week. The Irish
Government figures are currently calculated on the basis of 1.7% growth in 2011,
but in the light of the deterioration in the labour market we expect that the
Department of Finance will have to lower this and adjust its projections for
The upshot will likely be more austerity and with consumption already
dragging on GDP growth, Government spending will be the more likely target."
Obama's Deficit Plan: "It's a very brave plan I would say... it might not be enough, but it's a step in the right direction," John M. Hydeskov, chief analyst at Danske Markets told CNBC on President Obama's deficit plan:
Economic View 2: Breathing room for the Bank of England; Juliet Tennent added
- - "Pressure on the Bank of England eased somewhat yesterday when March
CPI came in well below forecast at 4%, down from 4.4% in February. Expectations
were for it to remain unchanged.
While this is still double the Bank’s mandated target it represents its
first drop in six months. With ongoing austerity likely to acerbate existing
weakness in consumer spending and the housing market, the Bank of England has
been reluctant to raise rates despite firm inflation. This unexpected drop in
inflation may give the doves on Monetary Policy Committee all the reason they
need to continue to hold off on interest rate increases.
The market certainly thought so and reacted by paring back interest rate
expectations and pushing the first rate rise out to September. The significant
move displays the uncertainty surrounding the future direction of interest rates
in the UK and it would not be a surprise if hawkish minutes from the most recent
MPC meeting (due 20th April) or stronger economic data saw expectations in that
regard rise again."
Negative reaction to Alcoa results prompts profit-taking in
equity markets: Davy's Flor O'Donoghue comments - -"Alcoa
traditionally kicks off the US earnings season and it did so again
for the first quarter of this year. Reaction to its results was
negative: revenues were weaker than expected and the stock closed
down 6%; it was the worst performer in the S&P 500. The negative
reaction to the results, along with worries about the worsening
nuclear crisis in Japan, sent equity markets lowers as investors
locked in profits.
Reflecting this, European markets had their worst day in a
month with the leading benchmarks closing down 1.4-1.7%. Across the
Atlantic, the S&P fell 0.8% as it retreated from near-12 month
highs. Along with Alcoa and Japan, the sharp retreat in oil prices
over the past couple of days hit sentiment and energy and materials
Elsewhere, retail sales data from the British Retail
Consortium (BRC) provided more evidence of a deteriorating consumer
environment in the UK. This, along with a weaker inflation reading
than had been expected (4% annual rate in March from 4.4% in
February), has clearly reduced the risk of an imminent interest rate
increase by the Monetary Policy Committee."
2010 A Good Year for Bordeaux?: "The vintages are already being compared to 1899-1900 so that gives you a fair idea of how rarely this comes around," Stacey Golding, investment director of Premier Cru Fine Wine Investments told CNBC on 2010's Bordeaux vintage wines:
In New York Tuesday, the
Dow fell 118 points or 0.95% to 12, 264.
The S&P 500 slid 0.78% and
the Nasdaq slipped 0.96%.
MSCI Asia Pacific Index rose 0.5% Wednesday.
Japan's Nikkei 225 rose 0.90%; China's Shanghai composite index added 0.96%;
Australia's S&P/ASX 200 Index gained 0.25% and the Bombay Stock Exchange's Sensex
index dipped 0.97% in Mumbai.
Europe, the Dow Jones Stoxx 600 is up 0.31% in early trading Wednesday.
ISEQ has risen 0.16% in Dublin.
is up 0.97%; Elan has dipped 2.16%; AIB has risen 6.82% and BoI has added 2.80%.
Tullow Oil (Add,
Closing Price £14.13): Ghana and Uganda update; Goodbody's Gerry Hennigan
comments -- "Tullow provided a drilling update this morning in which it
announced results from the Tweneboa-4 appraisal well offshore Ghana, the final
well to be drilled in the Tweneboa appraisal campaign.
kilometres southwest of Tweneboa-2 (encountered 21m of net pay); Tweneboa-4
encountered 18 metres of net gas condensate pay. The rig will now move to
perform drill stem tests on the Tweneboa-2 oil and gas condensate accumulations.
Tweneboa contributes 84.2p to our total risked NAV of £12.04 on a 70% risked
We see this as a
small incremental positive to the share price this morning. Elsewhere in Uganda,
following the farm-down to CNOOC and Total, two wells, the Jobi East prospect
and the Mpyo appraisal well, are expected to commence drilling in Exploration
Area 1 (EA 1) within the next two weeks."
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.
Tuesday this week, the BDI slipped 17 points or 1.25% at 1,342.
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 $15.
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”.
spot price of an oz of gold is trading in New York at $1,458.70, up $5.00 from
Irish Financials: Taking stock post AIB results, looking to BKIR on
Thursday; Goodbody's Eamonn Hughes comments - -
results yesterday had plenty of stats that made for sobering reading; a net loss
of €10.2bn, impairments at 13% of the loan book, criticised loans at 30%, an LDR
of 165% (some deposit outflows in Q1, but Anglo deal brings the LDR down c.20
pc), ECB/CB drawings at one-quarter of the balance sheet (Anglo & Poland deals
should reduce this), margins still in decline in 2011 and the bank confirmed
Having said all that, the recent PCAR tests pre-empted the results and as
we said yesterday in our First Glance, the extent of the required capital raise
(€13.3bn, of which €11.9bn is equity) and existing State stake will dampen any
private investor interest. Commentary today that the bank is mulling over forms
of mortgage debt forgiveness may dominate the headlines, but will only serve to
underpin the conservatism applied in the PCAR tests, with higher mortgage loan
losses applied by the Central Bank in the tests (4.1% in the base case across
the sector) than those guided by the banks (3.3%).
Higher impaired loans, with deposit & margin pressures will likely feature in
Thursday’s FY10 results of Bank of Ireland. However, the historical 2010 figures
are likely to be a sideshow, with many of the key loan, deposit and capital
figures already flagged in the PCAR documents 10 days ago.
The main issue will be the capital raise. Our view would be that the
market - both equity and debt - probably needs guidance from BOI on a
sustainable P&L and balance sheet ahead of any capital raise given the many
uncertain metrics at play over the coming 3 years covered by the PCAR tests -
prospective loan losses, pace and costs of de-leveraging, margin trends,
economic growth etc. However, we suspect it is unlikely that BKIR will be ready
with its plans this Thursday so soon after the stress tests. We’ll see what
happens tomorrow, but as we mentioned in our PCAR note on April 1, we are
struggling to make the current BKIR valuation work based on our assessment of
the future potential NAV and franchise value."