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News : International Last Updated: Feb 9, 2012 - 10:16 AM


Markets: Credit Suisse reports Q4 2011 loss; UK-listed Greencore has strong start to its financial year; ECB expected to keep rates on hold
By Finfacts Team
Feb 9, 2012 - 10:00 AM

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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, today 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 tests."

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 2009.

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 €1 trillion."

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:

US Markets

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%.

Asia Markets

The MSCI Asia Pacific Index lost less that 0.01% Thursday.

Japan's 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%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.32% in early trading Thursday.

The ISEQ is up 0.19% in Dublin.

DCC has risen 1.44%.

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 $1.3293 and at £0.8383.

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.

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 Wednesday this week, the BDI rose 16 points or 2.42% to 676 - -  a 25 year low but the third positive trading session in more than a month.

Freighter Oversupply Weighs on Shipowners and Banks - - Jan 26, 2012: The New York Times says vessels bought during the global commodity boom are only now being delivered, putting pressure on the European banks that financed the purchases.

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.

Crude oil for February 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $99.30 up 59 cents from Wednesday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $118.09. 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 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.

That spread 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 narrowed.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,734.50 up $3.50 from Wednesday's close in New York.

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

Check out our new subscription service, Finfacts Premium , at a low annual charge of €25 - - if you are a regular user of Finfacts, 50 euro cent a week is hardly a huge ask to support the service.

It's a simple fact that in the prevailing economic climate, the provision of high quality content cannot be sustained through advertising alone. 

Business executives who put a premium on time and value high quality information, should use our service.


© Copyright 2011 by Finfacts.com

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