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News : International Last Updated: Nov 22, 2011 - 10:43 AM


Markets News: Irish house prices at year 2000 level; Irish mortgage approvals at 1971 level
By Finfacts Team
Nov 22, 2011 - 9:06 AM

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Minister of State at the Department of Agriculture, Food and the Marine, Shane McEntee, has marked the passage into law of the Welfare of Greyhounds Act 2011 by visiting the greyhound premises of one of the country’s leading breeders and trainers, Pat Savage, near Slane, county Meath. Is the country going to the dogs?

Economic View; House prices now back to 2000 levels: Dermot O’Leary, chief economist at Goodbody, comments - - "The four and a half year journey downwards in Irish property prices continued in October. Not only that, Irish residential property prices fell by 2.2% mom, the fastest pace since April 2009 in October, according to data released by the CSO yesterday. This took the annual rate of decline to -15.1% (from -14.3% in September), with every category seeing an acceleration in the rate of annual decline.

Overall, the official index suggests that residential property prices have fallen by 45% from the 2007 peak, taking prices back to levels last seen in mid-2000. Apartment prices in Dublin have seen the most severe declines, both for 2011 thus far and from the peak. From the peak, apartment prices in Dublin are now down by an average 60%. Dublin house prices are down by 51% from the peak, compared to a 42% decline for houses outside the capital.

It is likely that increased price discovery over recent months due to high-profile property auctions has increased transparency in the property market, leading to lower prices. These auctions show that, at the margin, transactions are taking place at prices 60%+ below 2006 levels. The majority of these transactions are in the form of cash and would not get reported in the official data.

As we learned last week from the Irish Banking Federation (IBF) mortgage statistics, liquidity in the market remains very low, with mortgage transactions set to fall to the lowest level since 1971 this year. Access to mortgage credit is a prerequisite for stabilisation in prices."

Bank of Ireland (Closing Price €0.078): Offers to buy back mortgage securitisation; Eamonn Hughes, head of research at Goodbody, comments - - "BOI yesterday afternoon offered to buy back up to €1bn of securitised mortgages. The €1.5bn of Kildare and €1.8bn of Brunel No 1 securities will see BOI offer a minimum purchase price ranging from 28-92%, though closer to the latter on the larger chunks of the portfolios. The offer will close on December 1 and will be a modified Dutch auction. The bank has indicated that it will not initiate the exercise of the early redemption options for the notes on the relevant step-up dates in March and April 2012, so investors in the instruments looking to exit may take the opportunity of the current offer.

Securitisations are a cheap source of long term funding and the move will take the mortgages back on the bank’s balance sheet, so the move yesterday surprised us, though it appears to have the support of the Central Bank. The arrears level on the portfolios (4.6% in September) is lower than the main book (5.2% for the loan book in June). Should the assets be tendered below par and the book is performing relatively well, so haircuts are likely to be tight, there could be some gains for the bank, with some speculation that the bank could generate about €200m from the transaction. This could be worth about 0.6c to NAV or half that on our valuation (we use 0.5x valuation metric, though bear in mind that distressed banks in Europe are trading on lower than that (for instance, Lloyds and RBS are trading on two thirds of that again, closer to 0.3x!)."

UK public finances under scrutiny: Conall Mac Coille, chief economist at Davy, comments  - - "On November 29th, the UK Office for Budgetary Responsibility (OBR) will publish its updated forecasts for the economy and public finances. And last night, UK prime minister David Cameron warned that the OBR will be downgrading its forecasts for both GDP growth and the government deficit and debt. Indeed, UK public finance figures released this morning are likely to show that tax revenue growth continues to fall behind expectations. In the first six months, current receipts had grown by 4.9%, well below the 6.9% expansion expected for the full budget year.

So, the coalition government will be faced with very difficult choices heading into the March 2012 Budget. On one hand, additional austerity measures will hurt the UK economy, already on the brink of a double-dip recession. But failure to hit the targets set out in last year's budget would risk a sharp turnaround in market sentiment towards UK gilts.

Recent events in Europe have meant that the UK has been a relative safe haven for bond markets. The yield on 10-year UK gilts is currently 2.2%. But the pace and magnitude of the fiscal adjustment being attempted in the UK is very similar to that in Ireland. In the March Budget, the coalition government was targeting a deficit of 7.9% of GDP in 2011 and 6.2% of GDP in 2012, gradually closing to 1.5% by 2015. And the government debt-to-GDP ratio was expected to peak at 87.2% in 2013.

However, these targets were predicated on budgetary expectations for UK GDP growth of 1.7% in 2011 and 2.5% in 2012. Current consensus forecasts are for 1.0% GDP growth in 2011 and 1.1% in 2012. With growth weaker than expected, the UK is likely to run a budget deficit close to 10% of GDP for a second year running, and government debt is likely to peak above 90% of GDP. So, without additional austerity measures, market sentiment towards UK gilts could turn more quickly than expected."

Spain Due to Pay High Borrowing Costs in Debt Auction: Baldomero Falcones, CEO & chairman of the FCC, joined CNBC, to discuss the implications of the Spanish debt auction:

US Markets

In New York Monday, the Dow dipped 249 points or 2.11%.

The S&P 500 slid 1.86% and the Nasdaq slipped 1.92%.

Asia Markets

The MSCI Asia Pacific fell 0.1% Tuesday.

Japan's Nikkei 225 dropped 0.40%; China's Shanghai Composite dropped 0.10%; Australia's S&P/ASX 200 declined 0.72% and the Bombay Stock Exchange Sensex 30 index in Mumbai added 1.58%. South Korea's Kospi climbed 0.55%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 gained 0.55% in early trading Tuesday.

The ISEQ has risen 0.88% in Dublin.

CRH has risen 2.60% and Kenmare Resources has gained 4.88%.

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 $1.3548 and at £0.8641.

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 Monday this week, the BDI fell 21points or 1.1% to 1,874.

Crude oil for November 2011 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $97.85 down 93 cents from Monday's close. In London, Brent for November delivery is trading on the International Commodities Exchangeat $107.69. 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 $9 - - The Globe and Mail says that for the past 10 months, Canadian producers - - whose prices are tied to WTI - - have been taking steep discounts for their oil compared with international crude prices that are benchmarked against North Sea Brent, which can be shipped more readily. In the past, WTI tended to trade at a small premium to Brent, because it is easier to refine.

That spread hit a peak of $28.08 (U.S.) on Oct. 14, but has fallen dramatically since then. After plans for more pipeline capacity at Cushing, Oklahoma, the differential narrowed by nearly $4; it widened slightly Thursday to $8.27 (U.S.), as both WTI and Brent lost ground.

Gold spot price

The spot price of an oz of gold is trading in New York is at $1,695.30 per oz, up $18.00 from Monday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 6.

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