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News : International Last Updated: Oct 5, 2012 - 2:59 PM


Markets: Bank of Japan says economic activity leveling off; Samsung previews record third quarter
By Finfacts Team
Oct 5, 2012 - 10:30 AM

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The Bank of Japan said in a statement that it expected the world's third-largest economy to "level off" for now, with inflation at about 0%.

In an unusual move, the government's national policy minister, Seiji Maehara, told reporters he attended the central bank's meeting to appeal for more dramatic action to spur growth.

The Bank said it will encourage the uncollateralized overnight call rate (the benchmark rate) to remain at around 0 to 0.1%.

The Bank said: "Japan's economic activity is leveling off more or less. Exports and industrial production have been relatively weak as overseas economies have moved somewhat deeper into the deceleration phase. On the other hand, domestic demand has been resilient, mainly supported by reconstruction-related demand. Specifically, public investment has continued to increase, and housing investment has generally been picking up. Private consumption has been resilient with the employment situation on an improving trend. Business fixed investment has been on a moderate increasing trend as corporate profits have improved on the whole."

The policy committee agreed by unanimous vote to leave policy unchanged.

Samsung Electronics Co, the Korean electronics giant, today previewed its third-quarter report and said it expects that operating profit nearly doubled from a year earlier to record, boosted by strong smartphones sales that offset weak semiconductor orders.

The company’s earnings preview estimated July-September operating income at 8.1tn won ($7.3bn), compared with 4.25tn won in the year-earlier period.   

The world’s biggest maker of hand phones, memory chips and TVs estimated its quarterly revenue at 52tn won, a 26% growth from a year earlier.

Associated Press said Nomura Securities estimates Samsung sold 60m smartphones in the three months ending Sept. 30, including 18m units of the Galaxy S III. That is above 50m smartphones that Samsung is believed to have sold in April-June.

Economic View: ECB passes the baton to politicians; Dermot O'Leary of Goodbody comments  -- "The most important take away from yesterday’s ECB policy meeting is that the ECB believes that it has provided the tools and it is now up to politicians to step up to the plate. This goes for the Spanish government biting the bullet and requesting aid and is also aimed at the rest of the European leaders to come up with compromises on how to move forward to a banking union. The clear message is that the ECB cannot and will not solve the problems in the euro area on its own.

In terms of policy, rates were left on hold as expected and it appears that further rate cuts are unlikely as the ECB focuses on its “non-standard” measures, the latest of which is the OMT. At yesterday's press conference, Draghi reiterated the need for conditionality accompanying any request for the ECB to purchase bonds but also said that the conditions don’t need to be necessarily harsh. He also reiterated that IMF assistance will be requested in relation to setting this conditionality. Finally and most importantly, Draghi said that the ECB is ready with the OMT. Although he didn’t mention Spain specifically, all comments are relevant to them.

In other issues, Draghi stated that a voluntary haircut on the ECB's Greek holdings would constitute monetary financing. This makes such a move illegal but there is still a possibility that the ECB could transfer the bonds to another institution (the ESM?) before applying a haircut to the bonds. This is important as it is clear that some form of Official Sector Involvement will be necessary for Greece to be given its next tranche of aid, with the IMF repeating its concerns on Greek debt sustainability yesterday.

While Spain has captured the headlines in recent weeks, a bailout request, when it comes, is likely to return the market’s attention to the problems in Greece. The October 18 summit is seen as key, but agreement on Greece is likely to linger longer."

Markets focus on US labour market data: David McNamara of Davy comments  -- "With the US presidential election just weeks away, today's labour market report, the penultimate before the election, is unlikely to provide any respite for President Obama in his bid for re-election. While 115,000 new jobs are expected to have been added in September, an increase on the lacklustre 96,000 added in August, this figure is still well below the perceived break-even level of 125,000 which would hold the unemployment rate steady. The unemployment rate is expected to tick up to 8.2% from 8.1% in August, as the numbers joining the labour force offset any increase in new employment.

The underlying trend in 2012 has been very weak with a marked slowdown in monthly employment growth, averaging just 96,667 in the six months to August compared to robust growth of 200,000 on average in the six months to February. Businesses are clearly holding back on investment with the fiscal cliff now looming large, and the presidential election hanging in the balance. These factors will likely hold employment growth at subdued levels out to end-2012.

Elsewhere, Irish industrial production data released today (11.00) for August should show another month of robust growth in manufacturing output, up 5.7% year-to-date with export-orientated industries focused in pharmaceuticals and IT outpacing more traditional manufacturing industries in recent months."

US Markets

In New York Thursday, the Dow rose 81 points or 0.60% to 13,575.

The S&P 500 added 0.72% and the Nasdaq advanced 0.45%.

Asia Markets

The MSCI Asia Pacific Index gained 0.4% Friday.

Japan's Nikkei closed up 0.44%; China's markets were closed today; South Korea's Kospi rose 0.10%; Australia's S&P/ASX 200 added 0.94% and in Mumbai, the Bombay Stock Exchange's Sensex 30 Index dipped 0.75%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.29% in early morning trading Friday.

The ISEQ is up 0.71% in Dublin.

CRH has risen 1.33%

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 $1.3008 and at £0.8039.

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 Thursday this week the BDI closed up 47 points or 5.89% to 845 - -  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 October 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $91.11 down 60 cents from Thursday's close. In London, Brent for October delivery is trading on the International Commodities Exchange at $112.14. 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 $21 - - 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 $1,788.80, down $1.50 from Thursday's close in New York.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

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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