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The European Central Bank's governing council
will meet in Frankfurt today and it's expected to keep rates on hold. In
London, the Bank of England's Monetary Policy Committee will announce decisions
on rates and its bond-buying program at noon.
Credit Suisse Group AG, Switzerland's second- biggest bank,
reported a loss in the fourth quarter for the first time since 2008, hit by
“adverse” markets and restructuring costs at its investment bank.
Credit Suisse posted a 62% fall in net profit for the year
2011 to SFr1.95bn (€1.61bn) but it said
business in 2012 has been positive. It reported a net loss of Sfr637m, compared
with an SFr841m profit Q4 2010.
Brady W. Dougan, Chief Executive Officer, said:
“Our performance for the
fourth quarter 2011 was disappointing. It reflects both the adverse market
conditions during the period and the impact of the measures we have taken to
swiftly adapt our business to the evolving market and regulatory requirements.”
Greencore, the UK-listed food group today reported a good start to its
financial year with revenue up 52.6% and core underlying growth of 11.2% in the
17 weeks to January 27, 2012.
Goodbody's Liam Igoe commented: "Greencore has seen a strong start to FY12,
with headline sales in the core Convenience Foods Division up 52% to £353.8m in
the 17 weeks to January 27th. This comes as a result of the Uniq acquisition,
but also, equally importantly, as a result of underlying sales growth. The pre-Uniq
Greencore Convenience Foods business saw sales increase by 13.0% in the period,
while Uniq’s continuing businesses increased sales by 8.2%. Most of this was
generated in the UK (approx 2% from the USA business following the On-a-Roll
acquisition) and the bulk of the growth was volume related.
The Uniq acquisition is being bedded into the Group, with the loss-making
desserts business downsized by the exit from commodity yogurts (£17.8m of sales
ceded in the period as a result), while Uniq’s salad business has been fully
integrated into Greencore’s Food to Go Division. The Uniq sandwiches and its
remaining chilled desserts businesses are continuing to operate as separate
category businesses within the Group.
Greencore’s share price is up substantially year to date. Nevertheless its
rating remains modest in an absolute and relative sense. While we are leaving
our forecasts unchanged at this early stage of the financial year, the bias has
moved to the upside and, we, therefore, have updated our sum-of-the-parts
valuation model using an ev/ebitda multiple of 6.5x, which is not expensive
relative to the food sector generally. This generates a fair value of 81p which
we are setting as our new share price target and, consequently, retaining our
Buy stance." Economic View 1: Another crucial day for the Eurozone; Dermot O'Leary,
chief economist at Goodbody comments -- "Another crucial day has
arrived for the euro-zone. After persistent delays and prolonged negotiations,
Greek leaders are now close to agreement on the set of measures that will form
part of the country’s second aid package. The one sticking point revolves around
cuts to supplementary pensions that would save €300m per year; one of the three
parties involved in the discussions are resisting such moves, meaning savings
must be found elsewhere. Some of the details contained in the 50 page document
have been leaked in recent days.
They include a 22% reduction in the minimum wage, further large-scale
lay-offs in the public sector, immediate opening of closed professions and no
automatic pay increases until unemployment hits 19%. One can see why Greek
leaders are finding these measures hard to swallow, but as we have noted already
this week, they have little choice.
Another issue that has to be finalised is whether the ECB will take part in any
Official Sector Involvement (OSI) to complement the Private Sector Involvement
(PSI), thus improving debt sustainability in the country. With the ECB meeting
today, this is likely to be a key area of discussion. While we think such an
action was highly unlikely under a Trichet-led ECB (who didn’t want to get
involved in the purchase of government bonds in the first place), the
performance of Draghi thus far suggests that he will take a more constructive
approach to the problem. (As an aside, comments from Michael Noonan suggest that
he may try to use such an event to strengthen Ireland’s negotiating hand in the
discussions around the restructuring of promissory notes in IBRC).
It is hoped that final agreement will be reached on the final sticking point in
the negotiations in Greece this morning, with a euro-zone finance ministers’
meeting called for later tonight. Unsurprisingly, like the first bail-out of
Greece in May 2010, it is coming down to the wire."
Economic View 2: Rents stable/government introduces efforts to stimulate
the property market; Dermot O'Leary added - - "The latest
report on the residential rental property market has been published by Daft.ie
this morning. It shows that rents continue to flatline across the country, a
trend that has been evident since the start of 2010. This followed a 25%
collapse in the preceding two years. Moreover, rents are still over 20% below
2002 levels. There are, however, indications that rents will increase in 2012,
particularly in the Dublin market where the stock of available properties
continues to decline. Driven by developments in the capital, the stock of
available properties to rent has fallen to its lowest level since July 2008.
The Finance Bill released yesterday also contains some efforts to kickstart the
market, as well as increased reliefs to aid those mortgage holders who purchased
at the peak of the property boom. For these, mortgage interest relief will be
increased, which will lead to a maximum saving of €2000 for couples who
purchased at the very peak in 2007. To encourage purchases in 2012, mortgage
interest relief will be offered for both first-time buyers and those who buy a
second or subsequent home.
These temporary efforts are likely to have some positive impact on the property
market at very little cost to the Government, but the major impediment to
traction in the property market continues to be availability of credit. That
aspect should be the priority."
Irish Financials: Moodys report suggests 25% of Irish mortgage book to be
written down; Goodbody's Colm Foley comments -- "Moodys released a
report yesterday which suggested that up to 25% of the Irish mortgage book is
susceptible to being written down under proposals in the Government’s personal
insolvency legislation. This calculation is based on writing down the full
amount of negative equity in the Irish mortgage market, which is clearly
unrealistic. The new legislation will allow a write-down of debt in stressed
cases, but only if 75% of creditors support it. With mortgage debt being the
main issue, banks will still have the final say. It will be repayment ability,
rather than negative equity, that will be the main determinant of arrears and
losses in the banking system.
While details of the draft legislation are being finalised (expected end of
April) we do not envisage such large write-downs of Irish mortgage debt.
However, we have noted over the past few months the trend in the macro economic
scenario moving from the base case to the stress case in the Blackrock stress
Greek crisis rumbles on: David McNamara, economist at Davy, comments - -
"Stocks fell slightly yesterday as fears over the Greek debt negotiation
continued into another day. The Stoxx 50 closed marginally down 0.05% while the
FTSE also closed down 0.24%, but the Dow held firm, closing up 0.04%. Late last
night, fears were realised as the Greek finance minister departed for the
Eurogroup meeting in Brussels having failed to agree a package of cuts that were
supposedly necessary to ensure the release of the next tranche of troika funding
of €130bn. With an election looming in April, the parties were unwilling to
commit to the cuts demanded and so the crisis rumbles on. The March 20th
deadline, when bonds totalling €14.5bn mature, draws ever closer.
In the US, initial and continuing jobless claims are expected to increase
slightly when data is released later today. The initial claims register is
expected to pick up to 370,000 from 367,000 last week, but should continue its
downward trend which began in August 2011. Continuing claims are also expected
to increase slightly to 3.5m from 3.44m, but have halved in volume from peak in
In the UK, industrial production is also expected to have fallen by 3.1%
year-on-year when data are released later today. On the back of poor Q4 data
over the past number of weeks, the Bank of England will also announce any
changes to its main bank rate and its target for asset purchases in 2012. The
bank's main rate is expected to be held at 0.5% and an extra £50bn in asset
purchases confirmed later today, bringing total asset purchases to £325bn. The
ECB will also announce its rate today and is expected to hold fire at 1% after a
relatively calm month on markets. The ECB will also detail the structure of the
next round of LTROs in which it may relax it collateral rules on loans of up to
Too Much Optimism on U.S. Economy? The GDP growth has been moderate but the private sector is growing almost five percent a year, with Austan Goolsbee, former Council of Economic Advisers chairman, who says it's ironic that those numbers are showing that growth is still high even though people say the reason the economy isn't growing as much is because of the growth of government:
On Wednesday in New York,
the Dow rose 6 points or 0.04% to 12 884.
The S&P added 0.22% and
the Nasdaq advanced 0.41%.
The MSCI Asia
Pacific Index lost less that 0.01% Thursday.
Nikkei 225 fell 0.15%; China’s Shanghai Composite
Index rose 0.09%. South
Korea's Kospi index added 0.53%. Australia's S&P/ASX 200 fell 0.18% and the
Bombay Stock Exchange Sensex 30 index in Mumbai climbed 0.85%.
The skyscrapers and
immaculate beaches of Singapore's seaport look out on one of the world’s largest
parking lots: mile after mile of empty cargo ships, as far as the eye can see.
Similar fleets bob at anchor,
with empty cargo holds, off the coasts of southeast Malaysia and Hong Kong. And
dozens of newly built ships float empty near the giant shipyards of South Korea
and China, their owners from all over the world reluctant to accept delivery
during one of the worst markets ever for the global shipping industry.
As recently as six weeks ago
large freighters that can carry bulk commodities like iron ore or grain were
fetching charter rates of $15,000 a day. Now, brokers and owners say, the going
rate is $6,000 a day. If any customers can even be found.
between the US benchmark WTI (West Texas Intermediate) used on the New York
Mercantile Exchange and Brent is almost $19 - - 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.
hit a peak of $28.08 (US) on Oct. 14, but has fallen dramatically since then.
After plans for more pipeline capacity at Cushing, Oklahoma, the differential