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News : International Last Updated: Jan 24, 2013 - 11:18 AM


Markets; Spain's jobless rate rises to 26.2%; CPL reports jump in interim profit
By Finfacts Team
Jan 24, 2013 - 9:19 AM

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Spain's Instituto Nacional de Estadística (National Statistics Institute) reported today that the number of unemployed persons increased by 187,300 persons in the fourth quarter to 5,965,400 and the unemployment rate rose to 26.02%.

By nationality, unemployment increased by 147,800 Spaniards and fell by 39,400 foreign nationals. The unemployment rate for the foreign population was 36.53%, 12.3 points higher than that of Spanish nationals (24.23%). Unemployed persons who lost their job over a year ago increased by 470,700. Report [pdf]

The Wall Street Journal reports that Barclays will lay off 15% of the employees in its investment-banking division across Asia, or about 70 people. The job cuts in Asia will hit the bank's merger-and-acquisitions advisory, equity capital markets, debt capital markets and the global finance and risk groups. The layoffs come as the bank cuts 10% of its investment-banking workforce world-wide, or about 2,000 employees.

CPL Resources, the recruitment group, today posted pre-tax profits of €5.9m for the six months to the end of December - -  a 31% increase on the same time in 2011.

The firm company said revenues for the six month period rose by 13% to €161.7m, while operating profits grew by 37% to €5.8m.

Colm Foley of Goodbody commented - - "CPL has reported H113 NFI (Net Fee Income) of €23.71m (+14% yoy and 6% ahead of our €22.5m estimate). EPS of 16.9 cent compared to our estimate of 16 cent and PBT of €5.95m was 7% ahead of our forecasts. Gross margin was broadly flat at 14.7% while the conversion ratio (Gross profits to Operating profits) improved by 420bps to 24.5% which was a function of growth in permanent placements and an on-going focus on costs.

The company reiterated its cautious stance with conditions expected to remain challenging. Management see opportunities for growth in key areas of the business and the company highlights that medium term visibility remains difficult, but still expect performance for the second half of the year to be similar to H1. This is another positive set of results from CPL. Given the continued improvement in permanent revenues, a more stable outlook on the macro environment and improved sentiment amongst employers; we remain comfortable that CPL will continue to deliver earnings growth. We would expect to increase forecasts by mid-single digit levels (currently FY13f EPS 33.6 cent). These results provide further confidence in our positive stance on the stock. Our view is based on continued forecasted earnings growth, a strong cash position, a track record of consistent returns to shareholders (note the 33% increase in dividend) and an excellent management team. We currently value the company on 13x PE and reiterate our BUY call."

 Justin Doyle, Investec Bank Ireland, said today:

  • "It’s PMI Thursday and the Chinese are on the back nine and comfortable leaders with a scorching 51.9 (51.7 consensus).
  • The French teed off next at 7:58, posting a paltry 42.9 ( 45.0 consensus). The Germans are on the practice green at the moment and are due to tee off at 8:28 with overall EZ PMI numbers having a bite to eat before they launch down the fairway at 9:28. I’m sure Mr. Draghi much like our own Paul McGinley will be watching his players very closely.
  • The much anticipated Apple quarterly earnings numbers were a mixed bag last night. They beat EPS expectations and fell just short of earnings forecast but worryingly sales growth (lowest since ’09) and their revenue and margin forecasts disappointed.
  • In a very crowded market, it now seems that the days of exponential growth that has been synonymous with the Apple brand and in particular the iPhone may just be nearing an end.
  • It also seems that most infamous pastimes of European politicians and policy makers: ‘kicking the can’ has been taken up with some gusto by their American cousins as the U.S. House of Representatives voted last night to suspend the debt."

Economic View: Rapid mortgage lending growth to feature in 2013: Dermot O'Leary of Goodbody comments  - - "AIB yesterday announced that its mortgage lending target for 2013 is €2bn. The bank also stated that it lent €1.2bn in mortgages in 2012, representing 45% of the market (Bank of Ireland represented about 40% of the market in 2012). This implies that mortgage lending hit €2.7bn in 2012, higher than our forecast of €2.4bn, and 12% up on the 2011 total.

Full market data are not available, but this would imply that lending growth of c.60% yoy was achieved in Q4, or about €1bn, significantly above our forecasts (we have 23% annual growth pencilled in for Q4 after 6% in Q3). Moreover, this rate of lending growth understates the true level of housing transactions given the presence of cash purchasers. We estimate that 46% of house purchases were for cash in 2012. Bank of Ireland last week reiterated a €2bn target for mortgage lending that it made last October and has also stated that it has already received €400m in applications for this fund. Permanent TSB said they would lend €350m in mortgages this year. If targets are met, mortgage lending would reach c.€4.5bn, which is almost 70% above the 2012 estimated level. We currently have 22% growth in gross lending for the market in our numbers (to c.€3bn), so clearly there is upside if these targets are reached.
Gross lending will not get back to peak 2006 levels of €40bn but positive Irish housing market trends are likely to be a major feature in 2013

Banks Mortgage growth targets: Eamonn Hughes and Colm Foley of Goodbody comment   - -"Our economics team has referred to comments from the banks on mortgage lending targets for the year ahead. AIB indicated yesterday that its target lending for this year is €2bn having advanced €1.2bn in 2012. Last week, BOI re-iterated its lending target of €2bn for 2013. Combined with guidance from PTSB that it intends to advance €350m in mortgages in 2013 (5x its 2012 outturn), there is the potential for mortgage lending to outstrip forecasts.

We recently updated our estimates for AIB which include mortgage lending in line with the revised figures announced from the bank. Our current BOI forecasts trail the bank’s target for the full year. Target lending at both BOI and AIB is at similar levels notwithstanding that its loan book is only two-thirds that of the latter. Our gross new business estimates for BOI broadly reflect that pro-rata pattern and delivering on a figure closer to €2bn could potentially see an upward bias to our net interest income."

Bank of Ireland: BOI reduces its branch network in Northern Ireland; Eamonn Hughes comments - - "Bank of Ireland has indicated that it is to close 9 branches across its Northern Ireland network, leaving it with 35. The move comes as the bank seeks to improve its cost base, but stands in contrast to the Republic of Ireland where the bank is retaining its existing branch network. In due course, we believe that this should help the bank with deposit gathering as others pare back.

UK labour market continues to beat expectations but may not ward off ratings agents' concerns on economic growth: Conall Mac Coille of Davy comments  -- "Stock markets treaded water yesterday. The Euro Stoxx 50 fell 0.3% while the S&P 500 rose 0.2%. Risk appetite took some solace from the vote in the Republican-led House of Representatives to suspend the US debt ceiling decision until May 19th. Positive earnings news from technology stocks IBM and Google also helped sentiment. But the news that Apple Inc. has disappointed earnings expectations may depress stock markets today. Overnight, Asian stock indices fell despite the positive news that the HSBC manufacturing PMI survey for China rose to 51.9 in January, a two-year high. That said, stock index futures point to little change in European indices at the open this morning.

UK employment data released yesterday indicated a robust 1.9% annual growth rate in November. The unemployment rate fell to 7.7%. Total numbers unemployed fell 20,000 and a timelier claimant count measure showed a further 10,000 drop in December. The strong pace of UK employment growth has been a puzzle. With GDP contracting in 2012, surveys of firms have indicated poor employment prospects.

One explanation has been temporary part-time work during the Olympics. But full-time employment grew 1.5% in November, its highest rate since 2008. Nominal pay growth fell to 1.3% in the year to November, down from 2.4% earlier in 2012. So waning wage pressures may have stimulated labour demand. With CPI inflation at 2.7%, real wages per employee continue to contract. But with employment growth at 1.9%, aggregate UK household income growth is in positive territory, clearly a positive for consumer spending in 2013.

However, Friday's GDP release is likely to show a contraction of the UK economy in Q4, heralding talk of a 'triple-dip' recession. We expect that the contraction will be much sharper than the -0.1% quarter-on-quarter consensus. With ratings agents threatening the AAA rating because of poor growth prospects, the UK may well be downgraded in the near future.

On Wednesday, Bank of England governor, Mervyn King, indicated that he is ready to provide additional monetary support if needed. So any ratings action could have a negligible impact on UK gilt yields, particularly if investors perceive that the Bank of England may respond with additional quantitative easing. Nonetheless, the pressure on Chancellor George Osborne's austerity strategy will surely intensify, not least because any ratings action may highlight that low gilt yields are a product of the Bank's monetary policy, rather than the credibility of the coalition government's deficit reduction plan."

US Markets

In New York Wednesday, the Dow added 67 points or 0.49% to 13,779.

The S&P 500 rose 0.15% and the Nasdaq advanced 0.33%.

Asia Markets

The MSCI Asia Pacific Index slid 0.1% Thursday while Japan’s Nikkei 225 Stock Average rose 1.28%. 

China's Shanghai composite index fell 0.79%; South Korea's Kospi dropped 0.80%; Australia's S&P/ASX 200 advanced 0.47%; in Mumbai, the Bombay Stock Exchange's Sensex 30 dipped 0.47%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 inched down 0.06% in morning trading Thursday.

In Dublin, the ISEQ  is up 1.17%.

CRH has risen 2.31%; CPL added 1.82%.

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 $1.3317 and at £0.8416.

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 fell 8 points  or 0.97% to 817 - -  the BDI is up 16.88% in 2013.

Crude oil for March 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $96.24 down up 38 cents from Wednesday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $112.58. 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 $1676.50, down $8.30 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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