Michael Noonan, Irish minister for finance and Jack Rostowski, Polish minister for finance, at the Ecofin meeting of EU finance ministers, Brussels, July 11, 2012.

Grafton, the UK and Irish building materials group group turnover for the six months to the end of June rose by 4% to €1.05bn, mainly resulting from a favourable rate of sterling over the euro, the company said in a trading update for the first half of 2012 today.

Grafton said that its "operating performance was satisfactory in demanding market conditions primarily as a result of internal initiatives against the backdrop of cyclically low levels of activity in its markets. Results for the half year (before rationalisation costs) will be in line with expectations."

The firm saidthat turnover in its Irish merchanting business was down about 9% due to a further decline in spending on housing repair and maintenance.

Robert Eason of Goodbody commented: "Grafton has issued a trading update for the first six months in which it is guiding sales to have increased by 4% to €1.05bn (in-line with Goodbody Forecasts) and that “results for the half year (before rationalisation costs) will be in line with expectations”. Our FY operating forecast of €64m (+13% yoy) is split €30m H1 (+16%) and €34m H2 (+10%).

Sales trends at a divisional level are also as expected. In the UK lfl sales are up 1.4%, reflecting a strong start to the year (+4% Jan-Feb) but slowed into Q2 due to the well documented adverse weather in April / June. Given that lfls were up 1.7% in Jan-Apr, it implies a solid close to the half year.

Irish merchanting sales were down 9% in the period which is consistent with the decline reported for Jan-Apr. It is of note that the impact of lower sales has been mostly offset by cost savings. After a difficult first four months in Irish Retail (sales down -16%), the half year was helped by good trading in May leaving sales down 12.5%.

This is an encouraging statement which is in line with our forecasts and show that management is delivering on the self-help in a market where activity levels remain depressed. While the statement contains limited newsflow to act as a catalyst in the short-term, we still see the potential for the share-price to double in the medium-term given targeted group margins of 7.5% versus the current level of 3%."

Economic View: The hard work begins; Dermot O'Leary, chief economist of Goodbody comments  -- "Most of the reporting in Ireland of the latest EcoFin meeting has focused on successfully negotiating a deadline for a deal on the treatment of Ireland’s bank debt. This is exactly what Finance Minister Noonan hoped for going into the meeting and that is exactly what he got. Technical negotiations will now begin with a final decision expected on the issue by October.

Now the hard work starts. Irish officials will focus on two lines of attack.

First is the Irish government stakes in the viable banks (AIB, Bank of Ireland and Irish Life and Permanent). The Irish Times reports this morning that an EU fund may take a direct stake in these banks.

Our reading of the latest EcoFin meeting is that there is still significant disagreement about who will actually hold the liability in such cases. While European Commission officials have stated that the liability will be taken away from the sovereign in question, German Finance Minister Schäuble is of the view that the sovereign requesting the aid will still be on the hook. This is a fundamental difference in views that we would have concerns about.

This view also has implications for the achievement of Ireland’s second goal - - reducing the burden resulting from the promissory notes. We think it is likely that a deal to extend the term over which the promissory notes are paid off will be struck but it is a massive stretch to think that the burden will be removed from the sovereign entirely.

The October deadline was pushed so that clarity could be given on this issue prior to the twelve-month funding window that the IMF requires for disbursement of funds. Big decisions on easing Ireland’s bank debt burden however cannot be made in isolation. Delays at a European level in relation to the moves towards banking union could potentially disrupt this deadline."

Banks: AIB receives 20 offers for UK loan portfolio; Eamonn Hughes and Colm Foley comment  -- "AIB has received strong interest in its €500m UK property portfolio according to an article in the Irish Independent this morning. The bank has received up to 20 bids from a number of hedge funds, private equity firms and banks, with offers ranging from 50c – 65c in the euro. The bids are part of the €20bn deleveraging plan as set out by the Central Bank post the recapitalisation of the banks.

At a 35% discount this compares to the overall 7.9% discount Bank of Ireland took on its €10bn deleveraging programme, while Ulster bank recently received 17c in the euro for a loan portfolio from Kennedy Wilson & Deutsche Bank. The PCAR/PLAR assessment has accounted for an overall deleveraging target of 25-30% and given that most European banks are attempting to de-lever at the same time (sales expected to reach €1trillion) it is not all that surprising to see such significant haircuts offered."

The sixty-four billion euro question: Conall Mac Coille, chief economist at Davy, comments - - "Yesterday's statement from EU finance ministers helped sentiment in risk markets. The key point was the re-stated commitment to use the ESM more flexibly to address bond market tensions and also the agreement for an interim €30bn loan for Spain before the final €100bn bailout is approved. The European 50 Pr stock index closed up 0.6%.

However, concerns remain about what exactly has been agreed by EU leaders. German Finance Minister Wolfgang Schäuble indicated yesterday that the final liability for any capital injections into Spanish banks will continue to lie with the government. This means that after any capital injections from the ESM, a fall in the value of equity would have to be met by the Spanish government, creating a large contingent liability (rather than fully fledged sovereign debt) despite the €100bn bailout. However, in seeming contradiction to the German finance minister, EU officials indicated that no sovereign guarantees would be required.

In Ireland, a naïve debate has emerged on how much of the €64bn cost of recapitalising Ireland's banks should be met by the ESM. There has been little recognition that any capital injections by the ESM will be expected to return value, and there has been no indication in any EU statement that the ESM will be allowed to make simple fiscal transfers by making capital injections where there is no prospect of a return in value.

Indeed, the uncertainty on Spain's bailout reflects concern from EU officials on how the value of the ESM's capital injections may be protected. The prospect of the ESM potentially ploughing tens of billions of equity capital into a dead bank such as IBRC has never been part of the EU debate.

So the €34.7bn cost of recapitalising IBRC will stay with the Irish government. Of the remainder, we expect the Irish government could eventually sell stakes in Bank of Ireland and Allied Irish Banks worth around 5-8% of GDP. However, clearly these sales would fall well short of the 30% reduction in Irish government debt that some commentators have suggested is now likely."

US Markets

In New York Tuesday, the Dow fell 83 points or 0.65 to 12,653.

The S&P 500 fell 0.81% and the Nasdaq slid 1.00%.

Asia Markets

The MSCI Asia Pacific Index lost 0.2% Wednesday.

Japan's Nikkei 225 dropped 0.08%; China's Shanghai Composite rose 0.51%; Korea's Kospi index fell 0.17%; Australia's S&P/ASX 200 declined 0.04% and in Mumbai, the Bombay Stock Exchange's Sensex 30 Index fell 0.51%.

Asia benchmarks

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.55% in early trading Wednesday.

The ISEQ is down 0.50% in Dublin.

Grafton is down 0.32%.

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 $1.2263 and at £0.7892.

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 Tuesday this week the BDI closed down 2 points or 0.17% to 1,160 - -  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.

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 August 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $84.83, up 92 cents from Tuesday's close. In London, Brent for August delivery is trading on the International Commodities Exchange at $98.75. 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 $14 - - 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 is at $1,577.20, up $10.70 from Tuesday'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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