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News : International Last Updated: Dec 6, 2012 - 11:15 AM


Markets: Ryanair/ Aer Lingus report traffic up in November; Citi to cut 11,000 jobs; ECB to keep rates on hold
By Finfacts Team
Dec 6, 2012 - 11:10 AM

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The European Central Bank is expected to keep its rates unchanged today after its commitment to buy bonds has pushed down bond yields.

ECB governing council members meeting in Frankfurt today will hold the benchmark rate at a record low of 0.75%.

Citigroup said Wednesday that it will cut about 4% of its workforce or 11,000 jobs, in the first major move by its new chief executive Michael Corbat.

About 6,200 job cuts are targeted in Citi's consumer banking unit and the firm said that it will sell or scale back consumer operations in Pakistan, Paraguay, Romania, Turkey and Uruguay and focus on 150 cities around the world "that have the highest growth potential in consumer banking."

About 1,900 job cuts will come from the institutional clients group, which includes the investment bank. The company will also reduce jobs in technology and operations by using more automation and moving jobs to "lower-cost locations."

Cit has over 2,000 jobs in Dublin's international financial centre.

Aer Lingus reported today that total flown passenger numbers, including Aer Lingus Regional operations, increased by 2.1% to 766,000 in November 2012 compared to November 2011.

Short haul flown passengers, including Aer Lingus Regional, in November 2012 were 679,000, an increase of 1.0% on November 2011, while long haul flown passengers in November 2012 were 87,000, an increase of 13.0% on November 2011.

Aer Lingus mainline’s flown passenger load factor in November 2012 increased by 1.5 points on November 2011 to 76.6%. Short haul flown load factor was 70.5%, a decrease of 3.1 points on November 2011, with capacity decreasing by 2.7%. Short haul flown load factor performance, with its high dependency on Irish originating demand, was adversely impacted by threatened industrial action in the month. Long haul flown load factor was 85.7%, an increase of 8.4 points on November 2011, with capacity increasing by 1.3% on prior year.

Dónal O'Neill of Goodbody says: "Ryanair has delivered a strong set of traffic data for November, with capacity and passenger numbers up 4.9% on a flat load factor of 80%. In the twelve months to November, Ryanair has carried 79.6m passengers with rolling 12-month load factor stable at 82%. Having carried 12.5m pax in October and November, Ryanair only has to carry 4.5m (-5.6% yoy) passengers in December to hit our 17m pax target for Q3. This would imply capacity of 5.7m seats in December at last year's load factor of 79% equating to a capacity reduction of 5.8% in December yoy."

Justin Doyle, Investec Bank Ireland, said today:

  • "As we sit down at our desks, it is comforting to know that Greece isn’t too far away from the headlines. S& P have downgraded Greece to 'selective default' from CCC, having said that it is fully expected that they will return to CCC once the debt buyback programme is complete.
  • Over to the U.S. and it seems that the Democrats and Republicans are in the throes of some serious horse trading. Press reports are saying that among other innovative plans, they are near a compromise on the top tax rate i.e. setting it above the 35% and below the 39.6% highs of the Clinton administration.
  • The Reserve Bank of New Zealand held rates at 2.5% with a slightly more hawkish statement blaming inflation concerns, prompting a surge higher in the NZD in overnight trading.
  • Back to Europe and later today all eyes will be on the BoE and the ECB as they deliver their monthly rate announcements. We’re not expecting any huge shocks with rates to remain unchanged from both Central Banks. We do feel that Mr. Draghi may be deliver a slightly more downbeat statement following the rate announcement as recent European economic stats have been on the weaker side."

Irish Budget 2013 places focus on wealth: Conall Mac Coille of Davy, comments - - "Yesterday's Irish Budget for 2013 implemented consolidation measures worth €3.5bn (2% of GDP), split between €1.4bn of tax rises and €1.9bn of new spending cuts. An additional €700m of cuts to health (to bring it back within expenditure limits) brings the total expenditure savings to be found in 2013 to €2.6bn.

The cuts are expected to be sufficient to reduce the deficit from 8.2% of GDP in 2012 to 7.5% in 2013, with debt peaking at 121% of GDP in 2013, falling to 117% in 2015. As ever, concerns remain that Ireland may not be able to achieve the GDP growth assumption underpinning the medium-term budgetary plans, to stabilise the debt/GDP ratio. The government's forecast for 1.5% GDP growth is above our forecast of 0.9%, and also the EU/IMF forecast of 1.1%.

Irish households will bear the brunt of the tax measures, with the government reaffirming its commitment to maintain the corporation tax rate at 12.5%. The tax measures are equivalent to 1.7% of household disposable income, which will clearly depress consumer spending in 2013. Within the revenue-raising measures, there was a clear focus on wealth. As expected, the value-based property tax was introduced yesterday — this is expected to raise €250m in 2013 and €500m in 2014. Increases in capital gains and capital acquisition taxes, in addition to a higher rate of DIRT, are expected to contribute €130m in 2013. Amongst the other measures, excise duties on alcohol and tobacco and higher vehicle registration and motor taxes are expected to contribute €355m.

On spending, the focus of the €2.6bn cuts was inevitably on the high-spending departments of Health and Social Protection. A cut in child benefit is expected to deliver €136m, job seekers benefit €33m, and the household benefits package €60m. In Health, €330m is expected to be saved in drug costs and €308m in pay-related savings. However, with net voted expenditure in these two departments over-running budget targets by close to €1bn in 2012, there will clearly be doubts about whether cuts can be achieved.

Indeed, the spending cuts are highly focused on pay savings. In total, €750m in full-year pay bill savings are expected to be made in 2013. These include €458 full-year pay-related savings in Health, €46m from the Garda Siochana (police service) and a further €220m of unallocated pay savings that have yet to be negotiated. The total planned path of public sector job cuts remained unchanged yesterday. Full-time equivalents are set to fall to 282,500 by end-2014, from 290,700 in Q3 2012 — broadly half the pace of public sector job cuts seen in 2011 and 2012."

Davy report [pdf]

Economic View: Budget 2013 – The long fiscal grind continues; Dermot O'Leary comments - - "Irish budgets have lost much of their mystique over recent years due to the arrival of the Troika and the imposition of strict budgetary oversight. As a result, fiscal adjustment plans have been set out in advance, leaving budget day simply to fill in the gaps as to the specifics of the spending and taxation measures are. With leaks in the media being part of the budget run-in, there was little in the way of surprises in the announcements made yesterday.

Nevertheless, the €3.5bn in austerity measures announced yesterday represent a very tough fiscal effort by the Irish government. This takes the cumulative fiscal consolidation since 2008 to €27.5bn, amounting to 17% of GDP. This effort shows clear political will to tackle the fiscal problems. However, Ireland’s budget deficit is still estimated to be 7.5% of GDP in 2013. Efforts to make inroads in reducing the budget deficit have been hampered first by the collapse in the economy in real and nominal terms and the resulting spike in social benefits and sharp decline in tax revenues. As a result, Ireland will still have the highest budget deficit and second highest primary deficit in the euro area in 2013.

The Department of Finance estimates that the structural primary deficit will fall to 2% in 2013, down from 4% in 2012. However, given that the government is targeting a primary surplus of 3% by 2015, there is clearly much work to do. Ireland can succeed, but growth is key if tax revenue targets are to be met in 2014 and 2015. There are still clear risks that must not be ignored. See our note this morning for more details."

Financials: Key points of relevance from Budget 2013; Eamonn Hughes qand Colm Foley comment - - "

The Minister for Finance released Budget 2013 yesterday with the main focus for the banks likely to be on the property side (aside from the obvious contractionary impact of the budget on domestic demand).

On balance, there were a range of measures which should help the commercial property market. The Minister announced that Real Estate Investment Trusts (REITs) will be introduced. Also, if a commercial property is bought prior to end 2013 and held for 7 years, then the gain attributable to that seven year period will be relieved from CGT.

On the residential housing side, the main factor was the heavily flagged 0.18% residential property tax (0.25% on amounts over €1m). Stamp duty rates on residential property were left unchanged (1% up to €1m and 2% thereafter) and as per previous guidance, mortgage interest relief will no longer be available to purchasers after 2012 but relief levels for 2012 were slightly raised. Elsewhere, the government has decided to retain some legacy tax based property reliefs given the vulnerability of small investors to insolvency. However, it sees scope for larger investors to pay more and is proposing a property relief surcharge of 5% on investors with a gross income over €100,000.

On pensions, whilst the EU/IMF programme commits the government to move to the standard rate of tax relief on pensions, there will be no alteration in 2013. However, as flagged, the Minister announced that it will no longer "subsidise" contributions to pensions funds designed to deliver retirement income over €60,000 per annum.

The headline grabber was the well flagged residential property tax, but on balance commercial property probably fares better than the residential side. However, overall, we won’t be adjusting financials estimates post the budget."

Irish Budget 2013: Noonan improves R&D tax credit scheme; Howlin to rebrand more 'consultants'

Deutsche Bank hid up to $12bn of paper losses during the financial crisis say ex-staff

Finfacts Main Budget Page

US Markets

In New York Wednesday, the Dow rose 83 points or 0.64% to 13,034.

The S&P 500 added 0.16% and the Nasdaq dropped 0.77%.

Asia Markets

The MSCI Asia Pacific Index rose 0.2% Thursday.

Japan's Nikkei 225 closed up 0.81%; China's Shanghai Composite Index fell 0.13%; South Korea's Kospi gained 0.13%; Australia's S&P/ASX 200 fell 0.24%; in Mumbai, the Bombay Stock Exchange's Sensex 30 climbed 0.49%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.62% in morning trading Thursday.

The ISEQ  is up 0.88%.

CRH has risen 2.03%.


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 $1.3072 and at £0.8114.

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 down 32 points or 3.04% at 1,022 - -  the BDI is down 41.20% 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 January 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $88.13 up 25 cents from Wednesday's close. In London, Brent for January delivery is trading on the International Commodities Exchange at $109.06. The North Sea benchmark accounts for two-thirds of the global market.

Bloomberg reports that for the first year since the futures were created, Brent crude is poised to overtake West Texas Intermediate (WTI) oil as the world’s most-traded commodity.

Daily trading in Brent jumped 14% to average 567,000 contracts in the year to November 20 compared with all of 2011, while WTI fell 17% to 575,000, according to data from the ICE Futures Europe exchange in London and New York Mercantile Exchange compiled by Bloomberg. The number of Brent futures changing hands has exceeded those for WTI every month from April through October, the longest streak since at least 1995.

Brent, produced in the North Sea, is gaining favour among traders because of its role as the benchmark for energy prices from Saudi Arabia to Russia. Prices have climbed 34% in the past two years, reflecting everything from war in Libya to the embargo on Iran. WTI, the main grade in the US, has risen 9% as the nation, which prohibits crude exports, has struggled to clear a glut at Cushing, Oklahoma, the delivery point for Nymex futures.

Gold spot price

The spot price of an oz of gold is trading in New York at $1,692.60, down $1.70 from Wednesday'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 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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