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The agreement is viewed as a first step to a fiscal union and it provides for
more intrusive monitoring of a country's public finances.
The agreement has to be ratified by 12 member countries to take effect and
Ireland will hold a referendum to seek public approval in coming months. From
March 1 2013, any financial assistance under the permanent rescue fund,
the European Stability Mechanism, will be conditional on ratification of the
Destatis, the German federal statistics office,
reported Friday that retail turnover in January 2012 in Germany increased
3.5% in nominal terms and 1.6% in real terms compared with the corresponding
month of the previous year. The number of days open for sale was 26 in January
2012 and 25 in January 2011.
The January turnover was in nominal terms 1.0% and in real terms 1.6%
smaller than that in December 2011.
Economic View: Strict LDR targets to be reviewed as a means of tracking
deleveraging; Dermot O'Leary, chief economist at Goodbody, comments - -
"While deleveraging is a necessary evil for the Irish economy and financial
system in particular over the coming years as excesses of the boom years are
worked off, regular readers of our work will know that we disagree with the way
in which the process is being managed to date under the Troika Programme. Under
current policies, the covered banks need to hit a Loan-to-Deposit ratio target
of 122.5% by the end of 2013. We have argued (see Deleveraging, Banks and
Economic Recovery in Ireland, 17 October 2011), that this strict target was
creating perverse incentives for the banks to reduce the size of their loan
books, despite the fact that the assets to be delevered were considered
"non-core". We argued for a relaxation of these strict LDR targets.
Following recent speculation, the latest European Commission (EC) report on
Ireland's Programme confirmed that the Irish authorities asked "to explore
possible refinements of the programme's deleveraging framework", with the Irish
authorities suggesting that the emphasis on LDR "causes unintended adverse
consequences for the financial system and the economy as a whole". One of these
unintended consequences is the perverse incentives to reduce "core" loan books
to which we referred to in our paper. Another important factor, however, is an
intense competition for deposits among the covered banks, thus delaying the
banks return to sustainability.
We welcome the decision to review these targets. Two possibilities are referred
to in the EC report. One is to assess progress on the basis of the net stable
funding ratio (NFSR). The second is to assess progress on the basis of the
quantum of required asset disposals. The latter looks like a reasonable
proposition and would make it simpler to recognise whether or not non-core
assets are the ones that are deleveraging."
Irish Financials: EU commission report indicates loan arrears through the
PCAR base case; Eamonn Hughes of Goodbody comment - - "Our economist
comments above on the European Commission’s review report on Ireland’s
Adjustment Programme. The focus is on deleveraging for the banks, with the
potential implications for credit availability in the economy. Our focus below
is on arrears.
The various interested parties have agreed that the 2012 PCAR exercise (due in
November) will “retain the rigour and distinctive methodological features” of
PCAR 2011. In preparation for PCAR 2012, the authorities have agreed to
undertake an independent asset quality review of AIB, BOI and IL&P’s loan book
in H112. This will also “validate bank data and review the covered banks’
practices in relation to provisioning, income and impairment recognition, and
risk weighting, as well as banks’ loan portfolio resolution strategies and
systems”. The EU report comments on the 21% loan arrears across the system at
the end of Q3 last year and acknowledges that loan portfolios have continued to
deteriorate “in a context where some macro-economic variables are projected to
be closer to the PCAR adverse rather than base case scenario”, a point which we
have been making for the last eight weeks. The report highlights this in a chart
showing arrears above the base case since last August and are now approaching
the adverse case assumptions.
In our BOI note last week, we incorporated €2bn of the €2.7bn loan loss
differential between the base case and adverse case (all Irish, with no change
on international exposures) in our NAV estimates, which we cut from 23c to
17c per share. On Tuesday, IL&P raised its loan loss guidance for FY11 to €1.4bn
and we await results from AIB in late March. The EU report provides further
timely evidence of the deterioration in the path of arrears and our continued
cautiousness on the banks."
Exchequer Returns to show February tax-take: David McNamara, economist at
Davy comments -- "Exchequer Returns for February will be released by
the Department of Finance at 16.30 today. January's tax-take came in 17% ahead
of January 2011, and today's returns should be ahead of the February 2011
out-turn by 8%. The main drivers of the growth in tax returns in 2012 are
expected to be income tax (+€1bn) and VAT (€250m). While the VAT rise may help
receipts in 2012, the extra billion in income tax receipts may be a less
attainable target if activity continues to falter in the coming months.
Nevertheless, continued spending cuts should help to offset any shortfalls in
taxation with government spending expected to fall by 3.4% from €45bn in 2011 to
€44bn this year.
German retail sales for January, released this morning, revealed a drop of
1.6% on December and an upturn of 1.6% on January 2011. While the comparison to
January 2011 may be flattering due to last year's very cold winter, this is a
greater fall than forecast from December, and could be a sign of weakening
consumer spending in Germany. February data should reveal the trend in retail
sales and will be an important indicator for the Q1 GDP out-turn.
Italian GDP will also be released today and should show that the economy
grew by 0.3% in 2011 after a contraction of 0.7% in Q4 2011. The country's
exchequer deficit will also come in at 4%, well below Ireland's 10.1% in 2011
and close to the EU Stability and Growth Pact limit of 3%. However, the Italian
sovereign faces a solvency problem rather than a liquidity problem with a
debt/GDP ratio of 120%. Nevertheless, austerity measures enacted at the end of
2011 should bring the country's deficit closer to that 3% target."
Fruit and vegetable distributor Total Produce, a Fyffes spinoff,
has announced the completion of a deal to increase its stake in South African
company Capespan Group.
Total Produce announced last year that it had sold its 50% shareholding in
the European distribution business Capespan International Holdings to Capespan
Group in exchange for an additional 20 million shares in Capespan Group and
€8.5m in cash.
reports that Barclays Plc, the U.K.’s third- largest lender by assets,
took €8.2bn of three-year loans from the European Central Bank to provide
“funding stability” for its units in Spain and Portugal.
Banco de Espana will access 6.2 billion euros from the auction on Feb. 29 and
the remaining 2 billion euros via Banco de Portugal, London-based Barclays said
in a statement today.
“The funds provided through this facility will be used to manage the risk
associated with mismatches between Barclays Euro-denominated assets and deposits
in markets where Barclays has significant local operations,” Barclays said in
Are We Addicted to Liquidity Injections? John Authers, senior investment columist at the Financial Times, told CNBC, "when will the periphery begin to weigh on the markets? Probably when the supply of easy money dries up, it is very unclear exactly when that moment is going to come because you have central banks around the world playing from much the same script":
The Dow rose 28 points or
0.22% to 12,982 on Thursday.
The S&P 500 added 0.62% and
the Nasdaq advanced 0.64%.
The MSCI Asia
Pacific Index rose 0.2% Friday.
Nikkei 225 declined 0.16%; China’s Shanghai Composite Index gained 1.75%. South
Korea's Kospi index climbed 0.07%. Australia's S&P/ASX 200 added 0.41% and the
Bombay Stock Exchange Sensex 30 index in Mumbai advanced 0.41%.
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 over $16 - - 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