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News : International Last Updated: Feb 12, 2013 - 1:02 PM


Markets: Barclays to slash at least 3,700 jobs
By Finfacts Team
Feb 12, 2013 - 12:52 PM

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Olli Rehn, European monetary and economic affairs commissioner, and Michael Noonan, Irish finance minister, at a press conference following the Ecofin council of EU finance ministers' meeting, Brussels, Tuesday Feb 13, 2013.

Barclays, the UK bank that has been at the centre of the LIBOR interest rate fraud, today said it will cut thousands of jobs as it seeks to reduce costs in the next three years as part of a strategy overhaul outlined by Antony Jenkins, who took over as chief executive last year, from the ousted Bob Diamond.

The bank outlined a strategy that will see Barclays refocus investment in Africa, the US and the U.K. Under Jenkins's plan, the bank will cut at least 3,700 jobs, mostly in its investment bank, as it seeks to slice £1.7bn from its cost base down to around £16.8bn by 2015.

The moves come as the bank tries to recovered from its very bad reputation with regulators and reassure investors about future profitability. Last summer, several top managers left the bank after the lender admitted to trying to rig interbank lending rates.

Antony Jenkins, Barclays Plc, group chief executive said today: “Barclays is changing. We intend to change what Barclays does and how we do it and have set out clear commitments against which our progress can be measured. Our goal is to make Barclays the ‘Go-To’ bank for all our stakeholders. The plan that we set out today is critical to delivering that goal."

Andre Spicer, professor of organizational behaviour, at the Cass Business School, comments on today's announcement: “The strategy set out by Barclays’ CEO today is not about profit. It’s about rebuilding the legitimacy of the bank. He is trying to win back the trust of investors, regulators and the broader public.

To do this he has made some significant changes including refocusing the business and punishing the investment bankers. By cutting back the investment banking division, it appears Barclays is willing to kill the golden goose which has produced a significant chunk of its profits in the past.

This move is a gamble. It will inevitably lead to lower rates of profit in the future. It is also built on a move into an already crowded sector of the market - -  wealth management. It comes with significant collateral damage - - 1,900 people will go in retail banking.

The strategy relies on a long and difficult process of culture change within the bank. While culture change may be sorely needed, actually delivering it will prove to be a very difficult task.”

Justin Doyle, Investec Bank Ireland, said today:

  • "A bit of good news for Ireland as S&P raises Irelands debt rating from ‘negative’ to ‘stable’. That leaves Moody’s as the only major rating agency to leave Ireland on negative watch;

  • Over to the other side of the pond and the U.S. seemingly laid out their stall last night ahead of the imminent G20 meeting of Finance Ministers and central bank Governors in Moscow. It now seems that Japan definitely won’t be getting a finger wagging from the US at least;

  • The US Treasury undersecretary for international affairs, Lael Branaird said that the G7 is ‘very committed to market-determined, floating exchange rates except in rare circumstances’ and that the U.S. Treasury ‘supports Japan’s efforts to boost growth’;

  • Cue more JPY weakness. USD/JPY hit a new high of close to $94.50 earlier this morning. The Japanese Nikkei index closed up 2.25% on the day, that’s over a whopping 30% since the General election was called in mid November, so far so good for Mr. Abe."

Conall Mac Coille, chief economist of Davy, comments - - "The S&P upgrade is clearly a positive development for Irish yields. The key question remains whether Moody's follows suit, upgrading Ireland from its current non-investment grade status. If so, a new flow of previously constrained investors could push Irish yields down further, following fresh lows yesterday.

S&P upgrade may put pressure on Moody’s: Stock indices were little changed yesterday. The Euro Stoxx 50 fell 0.3% and the S&P500 0.1%. The euro has remained in a tight range against the dollar, currently $1.339, up a fifth of one cent since the close on Friday.

Irish bond yields fell to fresh lows yesterday, with the asking price on the 8-year bond falling to 3.8%. The news that S&P has upgraded Ireland's rating from 'negative' to 'stable' will surely push yields lower at the open this morning. S&P indicated that the deal on the promissory notes enhances Ireland’s chances of exiting the programme of EU/IMF support. The S&P upgrade is clearly a positive development. However, the key issue remains the Moody’s junk rating on Irish sovereign debt.

Since Moody’s rated Ireland as non-investment grade, Irish bond yields have had an extraordinary rally, falling from above 15% to below 4%. Nonetheless, despite clear concerns on ratings agents' performance through the financial crisis, many investors are still constrained by the Moody's ratings. Should the S&P upgrade pressure Moody’s to follow suit, it will allow many new investors into the Irish market, pushing Irish yields down further.

With unceasing investor appetite for Irish paper, an upgrade could push yields substantially lower. The synthetic (weighted average) euro bond yield is now 2.84%, and French and German yields at 2.25% and 1.6% respectively. Ireland is not likely to close the entire spread against the bund. The dislocation of assets through the European sovereign debt crisis has pushed German yields down, below the euro area average, but Italy, Spain and peripheral European countries yields up. In a low interest rate environment, an upgrade could allow Ireland to substantially close the spread with the euro area average at 2.84%."

Banks: NAMA cuts rents for 212 businesses; Eamonn Hughes and Colm Foley comment  -- "The Minister for Justice was asked in parliamentary discussions yesterday whether he would revisit upward only rent reviews for commercial properties. He reiterated that legislative intervention was not feasible but that market realities where playing their part, highlighting that NAMA had effected rent reductions for 212 businesses, saving tenants an estimated €13.5m. Mr Shatter added that of the 276 eligible applications for rent reductions only 8 were refused with a further 56 applications currently under review.
The figures from NAMA reflect the market reality for commercial landlords and tenants. Official commercial property rents are down 47% from the peak and clearly NAMA appears to be taking a pragmatic view of current market conditions for its tenants. This rental collapse drove a 65% peak to trough decline in commercial property prices."

US Markets

On Monday in New York, the Dow fell 22 points or 0.16% to 13,971.

The S&P 500 and the Nasdaq Composite fell 0.06%.

Asia Markets

Several  markets in Asia were closed for public holidays Monday, mainly to observe the Chinese Lunar New Year. Hong Kong, China, Taiwan, Singapore and Malaysia were all closed for the Lunar New Year festival.

Malaysia reopened on Tuesday, February 12, Hong Kong and Singapore will resume trading on Wednesday, February 13, and Taiwan will reopen on Thursday, February 14. China will remain closed for the whole week, and will reopen on Monday, February 18.

Japanese shares rose, with the Nikkei 225 Stock Average halting a two-day drop, as the yen weakened after a contender to become the next Bank of Japan governor signaled support for more monetary easing.

The Nikkei 225 gained 1.9% to close at 11,369.12 in Tokyo after equity markets were shut yesterday for a holiday; Korea's Kospi index fell 0.26%; Australia's S&P/ASX 200 inched down 0.01% and in Mumbai, the Bombay Stock Exchange's Sensex 30 index rose 0.52%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.02% in morning trading Tuesday.

In Dublin, the ISEQ  has risen 0.78%.

Elan is up 3.52%.

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 $1.3437 and at £0.8610.

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 Monday this week, the BDI fell 2 points  or 0.27% to 746 - -  the BDI is up 6.72% in 2013.

Crude oil for March 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $97.26 up 23 cents from Monday's close. In London, Brent for February delivery is trading on the International Commodities Exchange at $118.69. 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 $1648.40, down 10 cents from Monday'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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