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A young girl salutes President Barack Obama as he shakes hands along a ropeline with members of the military and their families at the White House, July 4, 2011.
CRH: The international building materials group CRH announced today that it
spent about €186m on acquisitions and investments in the first half of this
year, compared with €133m in the same period last year.
CRH (Reduce, Closing Price €15.01):
Acquisition spend on track; David O'Brien, analyst at Goodbody, commented -
- "CRH has reported that it has spent €186m on 21 acquisitions /
investments in the six months to June end, which compares to €367m on 14 deals
in H210 and €133m on 13 acquisitions in H110. The announced deals should add
incremental sales of c.€130m. In addition to the completed spend of €186m, CRH
has agreed to acquire VVM Group, a materials business in Belgium but is subject
to regulatory approval. Including VVM total acquisition spend increase to c.
Total spend inclusive of the VVM deal, is split 49%
European Materials, 34% US materials, 7% European Distribution & Products, 10%
US Distribution and Products. While the level of spend has fallen from H210 to
H111, this is the first time since 2008 that acquisitions have been carried out
across all divisions. The Group has completed its disposal plan with proceeds
totalling €345m, which included the divestment of Trialis distribution business
We have forecast spend of circa €600m during FY11
increasing from €520m in FY10, which the company are well on its way to
completing. While the impact of these updates on current year numbers is
limited, it is encouraging to see deals across all divisions, despite the
uncertain macro economic backdrop. As there was no update on the trading
environment, we look forward to management comments at the release of the H111
results in August."
Economic View 1: Paving the way for a tough
budget; Juliet Tennent, economist at Goodbody, commented - - "Despite the
exchequer returns for the first half of the year being in line with Government
forecasts, the Minister for Finance Michael Noonan has raised the prospect that
a tougher than expected budget will be necessary in December.
The original plan as laid out in last December’s
four year plan was for consolidation of €3.6bn in 2012 with a further €3.1bn in
both 2013 and 2014. The 2012 target was to be met by an increase in revenues of
€1.5bn and a decrease in spending of €2.1bn. However, Minister Noonan is now
talking in terms of €3.6bn being the minimum saving required in 2012 and has
mentioned that it could be as much as €4bn. In this context, the Minister has
acknowledged that the scope for delivering further consolidation will get more
difficult as adjustments totalling around €15bn have already been made since
2009 leaving less scope to identify further areas to cut expenditure. In
addition, consumer spending is already weak and further burdening the taxpayer
will do nothing to counter that.
Minister Noonan also emphasised that the margin that
Ireland is being charged for the bailout loans is excessive, he estimated a
profit to the lenders of €9bn over the lifetime of the facility, and said that
it makes rebalancing the economy more difficult.
While the Minister is starting to manage budgetary
expectations for 2012 at this early stage, it is also likely that he is
preparing the way for another attempt at getting the interest rate on the
bailout loans lowered when EU/IMF visit later this week."
Economic View 2: Portugal has rating cut to below
investment grade by Moody’s; Juliet
Tennent added - - "Further
evidence that the Eurozone debt crisis is far from over came yesterday evening
when Moody’s cut Portugal’s credit rating to Ba2 with a negative outlook. This
four notch downgrade means that Portugal is now rated below investment grade by
Moody’s. It is still rated just above investment grade by S&P and Fitch,
although the latter has it on negative watch. Moody’s cited concerns that
Portugal, like Greece, may need additional funding and that private sector
involvement could be a pre-condition for any further funding.
While Ireland has thus far managed to maintain its
investment grade status, contagion risks are highlighted by this latest ratings
move from Moody’s. Moody’s currently has Ireland at Baa3 with a negative
outlook, which is the lowest investment grade rating. While Fitch and S&P have
the sovereign rated marginally higher at BBB+."
Attention turns to
Portugal: Conall Mac Coille, chief economist at Davy, comments --
"Following the decision by the Greek parliament last week to pass a new round of
fiscal austerity measures, other peripheral economies have come back into focus.
The spotlight has come to rest on Portugal following the news that Moody's
Investors service has cut Portugal's credit rating from Baa1 to Ba2 (junk).
Unfortunately, Moody's reported the rationale for this decision is that the
'voluntary' private sector participation being negotiated for the new Greek
funding package is likely to be a similar precondition for Portugal's EU funding
support. That is, those investors who purchase Portuguese bonds might find
themselves under pressure to roll over those bonds by the EU authorities upon
payment of the principal. If so, presumably the same logic could be applied by
the ratings agents to other peripheral European economies. That said, Moody's
also said it had downgraded Portugal given the risks that it would be able to
achieve its deficit reduction plan. So, with Exchequer returns for the first
half of 2011 broadly on track, Ireland may not be treated in the same manner as
In a slow day for macroeconomic data, the market may focus on today's
Institute for Supply Management survey for the services sector in the United
States. Regional surveys from the Dallas and Richmond Federal Reserves indicate
that a slowdown is likely in June. Also, the market may focus on the Challenger
jobs cuts survey released today, ahead of the official payrolls numbers on
Friday. Non-farm payrolls rose by just 54,000 in May following increases in
excess of 200,000 per month earlier in the year. The market currently expects a
100,000 rise in June, but these expectations may change following today's job
cuts survey and the ADP employment report released on Thursday."
Greeks Will Stick With Euro: Finance Minister: Greek Finance Minister Evangelos Venizelos said Greece's part in the euro zone was "not reversible" in a first on CNBC interview Tuesday:
In New York Tuesday, the Dow fell 13 points or 0.10% to 12,570.
The S&P 500 fell 0.13% and the Nasdaq gained 0.35%.
President Obama on Deficit
The MSCI Asia Pacific Index
rose 0.3% Wednesday.
Japan's Nikkei 225 gained 1.10%;
China's Shanghai Composite index lost 0.29%; Australia's S&P/ASX 200 rose 0.15%
and the Bombay Stock Exchange's Sensex index slipped 0.02% in Mumbai.
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
July16th, the BDI rose 20 points or 1.12% to 1,700 to break the 35-session
On Tuesday this week, the BDI
rose 9 points or 0.63% to 1,428.
Financial Times reported 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.
The margin between the US
benchmark WTI (West Texas Intermediate) used on the New York Mercantile Exchange
and Brent is over $16.
The US Energy department
recently said that growing volumes of Canadian crude oil imported into the
United States contributed to record-high
levels at Cushing, Oklahoma of over 41m barrels at the end of March 2011
(86% of working capacity at Cushing), and a price discount for WTI compared with
similar-quality world crudes such as Brent. A discount for WTI is expected to
persist until transportation bottlenecks impacting the movement of mid-continent
crude oil to the Gulf coast are relieved. Consequently, the projected US refiner
average acquisition cost of crude oil, which was about $2.70 per barrel below
WTI in 2010, is $1.60 per barrel above WTI in 2011 and $1.10 per barrel above
WTI in 2012.