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News : International Last Updated: Apr 19, 2012 - 4:32 PM


Markets: Financial Stability Board publishes global guide for issuing mortgage loans
By Finfacts Team
Apr 19, 2012 - 10:16 AM

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President Barack Obama participates in a roundtable with unemployed workers who are students in Lorain County Community College job training programs, at Lorain Community College in Elyria, Ohio, April 18, 2012.

The Financial Stability Board, a regulatory group which advises the Group of Twenty leading advanced and emerging economies, said in a report [pdf] published on Wednesday that problems arising from poorly underwritten residential mortgages contributed significantly to the global financial crisis. It said that as the global crisis demonstrated, the consequences of weak residential mortgage underwriting practices in one country can be transferred globally through securitisation of mortgages underwritten to weak standards. As such, it is important to have sound underwriting practices at the point at which a mortgage loan is originally made.

Economic View: Large number still in “Undecided” camp ahead of Fiscal Treaty vote; Dermot O'Leary, chief economist of Goodbody comments: "The latest poll on the upcoming Irish referendum on the Fiscal Treaty, published in the Irish Times this morning, shows that the “Yes” side remains in the lead. However, the biggest finding of the latest poll is that there is still everything to play for in the campaign over the next six weeks, with 39% of voters saying that they “’don’t know”.

The results show that 30% plan to vote Yes to the Treaty, with 23% voting No. Excluding the “Don’t Knows” and those who will not vote, the Yes side is in the lead by 57% to 43%. This compares to a 60% Yes vote in a redC poll carried out for the Sunday Business Post in March, and 59% for the Yes side in the Sunday Independent poll also last month. It must be noted that there is a +/-3% margin of error on this morning’s poll, meaning that there is little difference in the split between the Yes/No side over the past month. The most notable difference in this morning’s poll is the “undecided” category. This compares to 26% undecided in the Sunday Business Post poll and 36% in the Sunday Independent.

The fact that the campaign has yet to get into full swing largely explains the sizeable percentage of undecided voters at this stage. However, the Government will be well aware that the Yes side had a bigger lead in the run up to the first Lisbon Treaty in 2008, a vote that eventually failed. One would expect, with only six weeks to go to the May 31st vote, the campaign will now have to step up a gear."

Banks: ptsb proposes to become a hub for mortgage servicing; Eamonn Hughes of Goodbody comments - - "With the Troika in town, there will be plenty of interest in the banks. One of the previous targets for this Troika review was the necessary agreement on a plan for ptsb. Press reports this morning (Irish Independent) indicate that one of the business plans under consideration for ptsb would see the entity take over the administration of the loss-making trackers that are set to be segregated under proposals currently being considered by the department of finance. We have commented on this in recent weeks, whereby proposals appear to be under active consideration to park underperforming tracker mortgages from AIB and ptsb into IBRC. However, the latter doesn’t have the operational capability to service the mortgage portfolio, which is where ptsb believes it can contribute.

The proposal attempts to deal with the operational aspects of any proposal to centralise troubled mortgages. Previous commentary has also seen proposals from ptsb to retain its UK mortgage book rather than the current disposal plan. Reports indicate that the Troika may not reach full agreement on all aspects of ptsb by the end of next week, but there could be broad agreement on the strategy. We’ll reserve judgement on the implications for ptsb (and others) until we see the broad proposals."

UK consumer remains squeezed by weak pay and price pressures: Conall Mac Coille, chief economist of Davy, comments  -- "UK labour market data released yesterday indicated a marginal improvement in labour market conditions. The unemployment rate fell from 8.4% to 8.3% in the three months to February, with the level of employment up 0.2%. The timely claimant count rate showed another small rise in social welfare claimants, now up to 1.613m in March.

Overall, the level of UK employment remains down 0.2% on February 2011. So the broad picture remains that private sector employment growth in the UK economy has not been sufficient to offset the fiscal consolidation and associated public sector job cuts. Private sector jobs grew by 319,000 last year as public sector jobs declined by 234,000, so that overall UK employment growth was just 0.3% in 2011.

The weakness of the UK labour market is now appearing in weaker nominal pay. In February, three-month average nominal pay growth fell to just 1.1%, well down on rates exceeding 2% in 2011 and above 4% prior to the recession. In addition, the squeeze on UK consumers looks likely to be amplified by stronger price pressures. CPI inflation in March was 3.5% ahead of market expectations.

Yesterday, the minutes of the Bank of England's last Monetary Policy Committee meeting indicated an 8-1 vote in favour of maintaining interest rates and asset purchases, noting the stronger-than-expected CPI inflation rate. For now we maintain our view, set out in our new UK economic forecasts this week, that UK CPI inflation will decline to 2.4% by the end of 2011 – a sharp fall from its current 3.5% rate but higher than many forecasts of a fall to 2% or below by year-end."

US markets

In New York Wednesday, the Dow fell 83 points or 0.63% to 13,033.

The S&P 500 slid 0.41% and the Nasdaq slipped 0.37%.

Asia Markets

The MSCI Asia Pacific Index fell 0.3% Thursday. The measure increased 11% in the first quarter.

Japan's Nikkei is down 1.04%; China’s Shanghai Composite Index declined 0.14%. South Korea's Kospi index dropped 0.46%. Australia's S&P/ASX 200 advanced 0.42% and the Bombay Stock Exchange Sensex 30 index in Mumbai dipped 0.04%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.67% in early trading Thursday.

The ISEQ has risen 0.77% in Dublin.

Elan is up 1.99%.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3118 and at £0.8184.

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 closed up 17 points or 1.72% at 1,006 - -  the BDI plunged a full 70% from its recent mid-October peak of 2,173 to an all-time low of 647 on February 3. London's Baltic Exchange was closed on Friday and Monday.

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 April 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $102.58 down 9 cents from Wednesday's close. In London, Brent for April delivery is trading on the International Commodities Exchange at $118.26. 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 at $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.

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 $1,642.40, up 40 cents 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.

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