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News : International Last Updated: Jul 8, 2011 - 4:01 AM


Markets News Thursday: ECB expected to raise benchmark interest rate by 0.25% to 1.5% today; Aer Lingus traffic fell in June
By Finfacts Team
Jul 7, 2011 - 8:23 AM

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Jean-Claude Trichet, European Central Bank president, Jyrki Katainen, then Finnish minister for finance and now prime minister with fellow Finn, Olli Rehn, member of the European Commission, Brussels, March 14, 2011.

ECB: The European Central Bank is expected to raise its benchmark interest rate by 0.25% to 1.5% today, when the governing council meets in Frankfurt.

Jean-Claude Trichet, ECB president, warned a number of times last month of the need for 'strong vigilance' on inflation  - - a code for an impending rate hike.

Besides inflation, Trichet is also faced with a struggle with governments who are trying to arrange a 'voluntary' participation with private holders of Greek debt, in extending maturities. However, Standard & Poor's, the ratings agency, has signalled that such a move as outlined by France, would trigger a default event.

Aer Lingus:Aer Lingus’ total booked passenger numbers in June 2011 were 925,000, a decrease of 1.7% compared to June 2010. Short haul booked passengers in June 2011 were 837,000, a 1.4% decrease on June 2010 while long haul booked passengers in June 2011 were 88,000, a 4.3% decline on June 2010.

The airline said booked passenger numbers were negatively impacted in June 2011 by uncertainty over scheduled services caused by the threat of industrial action by pilots’ trade union IALPA-IMPACT.

Aer Lingus’ booked load factor in June 2011 decreased by 2.1 points on June 2010 to 80.0%. Short haul booked load factor was 78.6%, a dip of 1.1 points on June 2010, with capacity increasing by 1.5%. Long haul booked load factor was 83.1%, a drop of 4.1 points on June 2010, with capacity increasing by 0.5%.

Aer Lingus Regional’s total booked passenger numbers in June 2011 were 70,000, an increase of 70.7% compared to June 2010.

Economic View: Ireland may hold on to its investment grade status for now; Juliet Tennent, economist at Goodbody, comments  --"The calm that followed last week’s agreement in Greece was well and truly shattered yesterday following Moody’s downgrade of Portugal’s credit rating to below investment grade. The severely negative reaction of financial markets is indicative of investors’ lack of confidence in the ability of the Euro area to deal decisively with the crisis. Contagion risks were evident with Irish yields soaring as fears that the sovereign’s investment grade rating was also in danger.

However, the risks that Moody’s is poised to act on Ireland seem to have receded somewhat following comments from the agency that it 'differentiates' between the peripheral countries and that it looks at 'each country’s economic strength, fiscal plan and medium term trajectory.' Exchequer returns for the first half of 2011, released earlier this week, showed that Ireland’s budgetary adjustment is delivering in line with expectations.

However, as GDP growth has disappointed, it is likely that additional measures will have to be taken in next year’s budget for Ireland to meet its deficit targets. This was acknowledged by the Minister for Finance, Michael Noonan, who earlier this week warned of a tough budget and suggested that up to €4bn in taxes and cuts would be necessary. Of the three major credit ratings agencies, Moody’s is the most negative on Ireland. It has the State rated one notch above investment grade and with a negative outlook. Fitch and S&P have Ireland on two notches higher than Moody’s, with S&P seeing Ireland’s outlook as stable.

As ratings are essential to the investment decisions of a variety of organisations, there is a real consequence to losing investment grade status. The possibility of Ireland losing its investment grade status would not only worsen sentiment, but could delay any return of the sovereign to the debt markets and make it more difficult for the banking system to wean itself of ECB funding."

Roubini on 'Perfect Storm':

US Markets

In New York Wednesday, the Dow rose 56 points or 0.45% to 12,626.

The S&P 500 fell rose 0.10% and the Nasdaq gained 0.29%.

Asia Markets

The MSCI Asia Pacific Index rose less than 0.1% Thursday.

Japan's Nikkei 225 fell 0.11%; China's Shanghai Composite index lost 0.17%; Australia's S&P/ASX 200 rose 0.01% and the Bombay Stock Exchange's Sensex index climbed 1.19% in Mumbai.

Asia benchmarks

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Overall UK shop price inflation increased to 2.9% in June from 2.3% in May

In Europe, the Dow Jones Stoxx 600 has risen 0.24% in early trading Thursday.

The ISEQ is up 0.33% in Dublin.

Dragon Oil is up 3.28%; Elan has risen 0.70%.

Dragon Oil: Gerry Hennigan, Goodbody analyst, commented this morning; "Dragon provided the latest results from its development programme this morning, outlining an initial flow rate of 1,767 bopd from well 157 on the Lam B platform. The prior average rate achieved from the previous six wells drilled from Lam B was 1,737 bopd and thus this morning’s announcement represents a marginal improvement on that. The trend of the recent past has been to drill single, rather than dual, completion wells and B/157 represents the latest example of that trend. That may enable Dragon to increase the number of wells drilled and yet, based on recent flow rates, has not sacrificed near term production.

We have pencilled in 11 development wells to be drilled in the current year out of a guided inventory of 35 development wells and five appraisal wells over the period 2011 to 2013. To date, if the B/150 well that commenced drilling in 2010 is excluded, Dragon, as the statement indicates, has drilled six development wells in the current year and is firmly on track to meet our haul of eleven wells.

Cumulative incremental production added year to date (including B/150) is 16.2 kbopd compared to 22.5 kbopd added in 2010 and 20.3 kbopd in 2009. Results to date would thus suggest that Dragon is well on track to maintain a target of adding incremental production in excess of 20.0 kbopd annually and thus maintain a track record dating back to 2007.

Infrastructure bottlenecks constrained production growth to 5.5% in 2010, the removal of which saw a surge in production in Q4. We see limited downside risk to our annual average production forecast of 58.4 kbopd for the current year and indeed events to date would suggest upside, evidence of which may well emerge when Dragon updates the market on July 21st in its scheduled trading statement."


European Benchmarks

Irish Share Prices

Irish Stock Market Capitalisation by Company

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Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies 

The euro is trading at $1.4342 and at £0.8973.

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 Wednesday this week, the BDI rose 15 points or 1.05%  to 1,443.

The 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.

Crude oil for August 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $97.40 up 75 cents from Wednesday's close. In London, Brent for August delivery is trading on the International Commodities Exchange at $114.26. 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 over $16.

The US Energy department recently said that growing volumes of Canadian crude oil imported into the United States contributed to record-high storage 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.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,531.50 per oz, up $2.10 from Wednesday's close in New York.

Obama's Twitter Townhall: President Obama holds a townhall meeting from the White House, with questions coming in from Twitter users around the country:

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