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News : International Last Updated: Oct 12, 2012 - 11:04 AM


Markets: Japanese minister has “extreme sense of crisis”; Irish residential rental yield highest since 2002
By Finfacts Team
Oct 12, 2012 - 9:47 AM

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The BBC World Debate, "Rescuing the Global Economy: What next?" with panelists: Christine Lagarde, managing director, IMF; Peter Orszag, vice chairman, Global Banking, Citigroup; Raghuram Rajan, chief economic advisor, Ministry of Finance, India; Wolfgang Schäuble, federal minister of finance, Germany and moderator Nik Gowing, Presenter, BBC World News, Octr 12, 2012 at the Tokyo International Forum in Toyko, Japan. IMF Staff Photograph/Stephen Jaffe

Seiji Maehara, Japan’s economy minister said Friday that he has a “extreme sense of crisis” as the government downgraded its economic assessment of the economy for a third month.

“It’s necessary to take a proper response on both fiscal and financial fronts,” Maehara told reporters in Tokyo after the government released a report for October.

“I have an extreme sense of crisis about current economic conditions,” Maehara said, according to Bloomberg. “Our biggest issue is the trend of yen appreciation, and the serious suffering this causes exporters,” adding that he would discuss the topic at meetings with the chiefs of the US Federal Reserve and the European Central Bank.

Japan's government downgraded its view of the economy for the third month in October as worries about Europe's debt crisis and China's slowdown intensified, adding risk to the growth outlook.

Slowing overseas demand prompted the government to lower its assessment on factory output for the third straight month.

"The economic recovery has had a weak tone recently due to a slowdown in the global economy, although some steadiness is still shown," the Cabinet Office said in its latest monthly report on Oct. 12.

The Cabinet office downgrade followed the Bank of Japan's warning last week that economic activity was leveling off.

The Cabinet Office said factory output is decreasing, but maintained its view of exports as weak in tone.

Japan has no intention of backing down in a damaging spat with China over the Senkaku Islands regardless of the negative impact it might have on economic ties with its largest trade partner, the economy minister told the Financial Times.

“It is best if the two countries can maintain good relations, but the problem has to do with Japan’s sovereignty over its own territory so we cannot compromise,” Seiji Maehara said in an interview on Thursday.

Officials from both countries agreed to hold vice- ministerial level discussions at an unspecified date, Japan’s Foreign Ministry said last night. The dispute “will have a number of mostly negative economic effects over the medium term,” Moody’s Analytics said in a report today.

Eurozone industrial production to post second consecutive month of growth: David McNamara of Davy comments -- "The Eurozone industrial production out-turn for August, released later today (10.00), should indicate that output expanded for the second consecutive month, with an expectation of 0.5-0.8% growth on the month following 0.5% growth in July.

Consensus-beating monthly out-turns in France (+1.5%), Spain (+1.6%) and Italy (+1.7%) likely pushed up on the index in August, despite a 0.5% fall in Germany. However, industrial output is still well down on the year: 2.4% in July, with the index likely to be down close to 3% year-on-year in August even if output matches expectations. Encouragingly, industrial production output is generally surpassing expectations in Q3, with PMIs in the low-to-mid 40s pointing to negative growth, but actual output bucking that trend. Industrial production may yet fall back in September in line with PMIs, but Q3 is looking like a much stronger quarter after a very weak Q2.

In the US, markets will focus on the October release of the Michigan Consumer Confidence measure today (14.55). After robust growth in September, from 74.3 to 78.3, on the back on the Fed’s QE3 announcement, the index is expected to fall back slightly to 78.0 in October, as the QE3 boost begins to fade. However, the better-than-expected labour market figures in September should sustain the gains in the index in the coming months, but may have come too late last week to effect any upturn in this month's index."

Commenting, Justin Doyle, Investec Bank Ireland, said: 

1.      The markets all but ignored Spain’s S&P two notch downgrade yesterday morning with the Euro/USD closing last night over 100 points higher against its lows of earlier in the day, for some strange reason the bid tone continues this morning. 

2.      The great and the good are in Japan this weekend as global finance ministers and central bankers gather in Tokyo for the annual IMF and World Bank meetings. The austerity versus growth argument should rumble on as Germany disagrees with the IMF’s call for an easing of fiscal consolidation on the European peripheral economies

3.      Greece was back in the news yesterday as their July unemployment rate rose to over 25%.......good to see that austerity is having such a positive impact! 

4.      Eurozone Industrial Production numbers are out later this morning………fingers crossed we get some good news.

Economic View: Residential rental yield highest since 2002; Dermot O'Leary of Goodbody comments  -- "Given the regional differences as well as the different supply and demand dynamics at work in the apartment versus family homes market it is somewhat difficult to come to conclusions on the state of the Irish property market. Nevertheless, there has been evidence recently of a bottoming out in the market, with particular emphasis on the situation in Dublin where supply is lower and demand is higher.

One of the key indicators we watch in terms of valuations in the market is rental yields. There are numerous sources for rental yields available, but we tend to focus on the official source of the CSO for national analysis. In 2006, we estimate the average residential yield in Ireland fell to a low of c.3%, well below historical and international norms. Despite a large decline in rents, the halving in house prices since that time has been sufficient to push the rental yield up significantly since that time. Using new rental data from the Census and updating for more recent rent movements (including yesterday’s CSO release) we estimate that the rental yield officially stood at 5.5% in Q3. This is the highest yield since 2002 but probably underestimates the degree to which the yield has adjusted upwards. This is because the official CSO data we base the house price movements upon does not include cash transactions. Including these may indicate an even sharper fall in house prices. As an indication, our analysis of Allsop Space property auction earlier in the year showed that transactions were occurring at average yields of c8%.

The key point is that rents have stabilised and have indeed started to rise in parts of the country. Coupled with the collapse in house prices, rental yields are now close to what we perceive to be fair value, albeit with the usual caveats of location."

US Markets

In New York Thursday, the Dow fell 19 points or 0.14% to 13,345.

The S&P 500 declined 0.02% and the Nasdaq dropped 0.08%.

Asia Markets

The MSCI Asia Pacific Index rose 0.5% on Friday.

Japan's Nikkei 225 closed down 0.15%; China's Shanghai Composite Index rose 0.10%; South Korea's Kospi added 0.01%; Australia's S&P/ASX 200 advanced 0.07% and in Mumbai, the Bombay Stock Exchange's Sensex 30 Index fell 0.42%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is down 0.27% in morning trading Friday.

The ISEQ is up  0.52% in Dublin.

Kerry Group has added 0.86%.

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 $1.2977 and at £0.8079.

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 28 points or 3.20% at 903 - -  the BDI is down 48.04% in 2012.

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 November 2012 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $92.39 up 32 cents from Thursday's close. In London, Brent for November delivery is trading on the International Commodities Exchange at $115.58. 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 $23 - - 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 $1,770.00, up $2.80 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.


© Copyright 2011 by Finfacts.com

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