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News : International Last Updated: Jan 3, 2013 - 11:05 AM


Markets: Spain added 59,000 jobs in December; CRH invested €630m in acquisitions in 2012
By Finfacts Team
Jan 3, 2013 - 9:32 AM

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Spain’s registered jobless fell for the first time in five months in December as service firms boosted hiring over the holiday season.

The number of people registering for unemployment benefits fell by 59,094 from November to 4.8m, the labour ministry in Madrid said today. This was the best result on record for December.

49,438 service jobs were added while 4,325 more construction workers and 2,794 more manufacturing workers lost their jobs.

The OECD think-tank for 34 mainly developed country governments expects the jobless rate in Spain to rise to 27% this year.

CRH plc, the international building materials group, announced  today18 acquisition and investment initiatives undertaken during the second half of 2012. The transactions completed since the end of June bring full year 2012 development activity for the group to almost €630m; with net deferred consideration of approximately €130m, cash spend for the year amounted to approximately €500m.   

CRH Acquisition spend reaches a four year high and renewed speculation on India: Robert Eason of Goodbody comments  -- "CRH has announced that it has spent €375m (including €130m of deferred consideration) on 18 deals in the second half of the year, split 32% Europe / Asia and 68% Americas. This compares to €0.25bn in the first half (65% Europe / 35% Americas) and implies over €200m was completed in the last 1-2 months of 2012. It also represents the largest spend since 2008.

A contributing factor to the step up in the deal flow in the last two months was the acquisition of Trap Rock Industries in New Jersey which adds 3-4% to CRH’s US permitted reserves. This is a sizeable deal. The remaining deals are the typical bolt-ons with the average transaction size in the second half of €21m versus less than €15m in H1.

Following the termination of talks in October with Jaypee Cement Corporation over the potential purchase of an equity stake in Jaypee’s Gujarat cement business there is press speculation today that CRH may be interested in acquiring Sree Jayajothi Cements. This business has a 3.2m tonne plant in Andhra Pradesh, which is in the province that CRH’s existing business (My Home Industries) is located with 4.8m tonnes of capacity. The speculated price is $390-420m (circa €300m).

Overall, we would view the up-tick in CRH’s acquisition spend as an incremental positive but with minimal impact to forecasts as we have already included €500m. We remain cautious on the stock given its bias to infrastructure in the US, its large presence in Europe and an already demanding multiple (19-20x FY13 earnings)."

Justin Doyle, Investec Bank Ireland, commented today:

  • "What a start to the year as most major global equity indices rallied in or around 2% on the day thanks to the last minute U.S. ‘fiscal cliff’ deal, averting an avalanche of tax hikes which could have plunged the US economy back into recession with potentially disastrous consequences for other global economies.
  • The riskier commodity based currencies such as the Aussie dollar and the Kiwi dollar shone brightest yesterday as a surge in risk appetite gripped the financial markets.
  • Peripheral European bond yields also enjoyed their day in the sun as Spanish and Italian bond yields rallied the bones of 25bp’s each yesterday to trade close to 5% and 4.25%.
  • Up today German employment numbers and the US ADP employment figure always a decent precursor to the eagerly awaited non farm payroll number tomorrow."

Economic View: Plans to exit the bailout to be presented; Dermot O'Leary of Goodbody comments  -- "At this point a year ago, few, including ourselves, would have genuinely believed that Ireland would now be making concrete plans for a full return to bond markets. At that time longer term yields were still at unsustainably high levels close to 8%. A year on, Ireland’s October 2020 bond is trading at a yield of just 4.35%, well below the initial funding costs agreed at the start of the bailout (which were subsequently reduced). It is reported that the Troika is now in the closing stages of finalising a report that will be presented to Irish officials with options that would increase the chances of Ireland’s full return to markets over the coming months. These conclusions will not be published but are likely to be at the top of the agenda in the next Troika review at the end of the month.

Some of these proposals were already outlined in the IMF’s eighth review, published in December. The options set out by the IMF include: (i) refinancing of the promissory notes; (ii) the use of the ECB’s Outright Monetary Transactions (OMT) program, and; (iii) funding backstops. All of these options will need the agreement of EU leaders, which is why Irish leaders have already restarted a diplomatic campaign for follow-through on commitments made last June to improve the sustainability of Ireland’s programme.

Although campaigning on national issues is frowned upon during presidencies, with Ireland in the spotlight over the next six months, European leaders will want to see a success story. For this to happen, words will have to be followed up with action."

Banks: Permanent TSB indicates funds secured to finance bond maturity; Eamonn Hughes and Colm Foley of Goodbody comments - - "Permanent TSB yesterday afternoon made a statement that it had secured funds to finance an upcoming bond maturity in response to speculation yesterday morning that it may have to issue bonds in the near future. PTSB has a $1.75bn bond maturing later this month (with a further maturity in April), but the bank indicated that 'PTSB has already secured the resources to finance upcoming bond maturities including a maturity due this month and will not be required to issue any bonds in the near future.'

It added that 'in tandem with its restructuring plan, the bank has plans in place to cover its liquidity and financing arrangements through the coming months and has sufficient collateral in place to raise funds as necessary.'

PTSB’s comments that it has sufficient resources to cover the upcoming bond maturity comes shortly after commentary that the bank is set to announce new business volume targets in the coming weeks. Ahead of that announcement, there has been some speculation that the targets will be at multiples of 2012 levels. However, this possibly reflects the very small base last year where recent comments have pitched new lending at less than €0.1bn in 2012, relatively immaterial in the context of the €33bn loan book."

Banks: SME business conditions less negative in Q4; Hughes and Foley added - - "The latest survey of quarterly business trends from ISME, the business lobby group (and reported in the Irish Independent this morning), show that market conditions improved in Q4 but many indicators are still in negative territory. Business confidence among SMEs improved from -17% in Q3 to -5% in Q4. Profitability expectations improved from -20% to -11% whilst future employment is now expected to be flat rather than declining slightly. Only export related companies are showing signs of growth. The ISME survey shows that operating conditions for the SME sector continue to be difficult but being less negative than previous surveys is a step in the right direction for the sector.

The Central Bank highlighted the SME sector as a trouble spot for the banks in the latter part of 2012 given extensive property related exposures of many SMEs. Some improvement in trading conditions is likely to ease pressure on SMEs in due course and play a factor in why our impairment charges in the SME sector are reducing modestly in 2013 over 2012 levels."

Another important year for stock-pickers: Barry Dixon of Davy comments - - "Although 2012 overall was a good year for equity markets, the variation in performance between, and more particularly within, sectors made it a difficult year for stock-pickers. Almost 80% of our calls in 2012 were correct, although many of these changed through the year.

Given the relatively benign macro outlook for 2013, it will be difficult for companies to generate organic top-line growth. In this environment, growth in organic profits will also be hard to achieve. Investors should continue to look for companies that can grow the top line regardless of the macro environment, have strong balance sheets and cash flow and are generating returns above their cost of capital

In the industrials space, we like Travis Perkins, Holcim and Smurfit Kappa Group while Geberit, ArcelorMittal and DS Smith will likely underperform in 2013. In transport and logistics, Ryanair, IAG and Deutsche Post DHL are our favoured stocks. Premier Oil is our top pick in the resources sector. In the consumer area, we like Associated British Foods, C&C, Frutarom and DCC. Our favoured name in the gaming sector is William Hill. "

US Markets

The Dow Jones Industrial Average jumped 308.41 points on Wednesday, to 13412.55, its best-ever start to a year according to The Wall Street Journal. In percentage terms, the 2.35% gain was the best opening since 2009.

The rise came after Congress struck a deal to avoid a bundle of automatic tax increases and spending cuts known as the "fiscal cliff."

The broader Standard & Poor's 500 index rose 36.23 points, or 2.5%, to 1,462.42. It was the S&P's best first-trading-day jump since 2009, according to Howard Silverblatt, senior index analyst for S&P Dow Jones Indices. The technology-heavy Nasdaq composite index gained 92.75 points, or 3.1%, to 3,112.26.

Asia Markets

The MSCI Asia Pacific Index  ex-Japan rose 0.4% Thursday to the highest level since August 2011.

Japan's and China's markets were closed for holidays; South Korea's Kospi dipped 0.58%; Australia's S&P/ASX 200 climbed 0.74%; in Mumbai, the Bombay Stock Exchange's Sensex 30 added 0.28%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.25% in morning trading Thursday.

In Dublin, the ISEQ  is down 0.04%.

CRH has dropped 1.80%.

European Benchmarks

Irish Share Prices

Key Index Performance Statistics

Euribor Rates

AIB Daily Report

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Currencies

The euro is trading at $1.3150 and at £0.8109.

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 fell 1 point to 698 - -  the BDI was down 57.02% 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 February 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $92.70 down 42 cents from Wednesday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $111.93 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 $1683.40, down $2.20 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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