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"As exit polls suggested, Bersani's PD party and coalition grouping look
to have won by a thin margin in the lower house, with the Italian political
system operating 'winners majority' take control. However, Berlusconi is
still disputing this;
But the results in the Senate suggest that no party or coalition will
have enough seats for control there. So whilst Bersani's centre left has
said it will try to form a government, it remains unclear what options it
has to do this. It cannot garner enough seats in the Senate even with
Monti's Civic Choice;
Note that the Senate results give the centre-left coalition 113 Senate
seats, Berlusconi’s coalition 116 seats, Grillo’s 5-star movement 54 seats
and Mario Monti 18 seats. All are well short of the 158 seats to form a
Senate majority;
Hence it does now look as if Italy could be headed back to the polls
again in a re-run, with a period of instability and uncertainty ahead and
little scope for continued reform in the interim;
Clearly this is negative for risk assets. The Euro has struggled
overnight on the news and Italian government bond yields are likely to climb
on the back of this (with an Italian bill auction due this morning)."
Liam Igoe of Goodbody said: Kerry Group Results ahead, but FY13 trimmed
- - "Kerry Group’s adjusted EPS (fully diluted) increased by 11.3%, 1% above our
10.5% forecast. Ingredients was the main driver of growth (+3.4% lfl), with
Kerry Foods (-1.5% lfl) impacted by the weak consumer backdrop.
Operating margins edged up, as expected, due to the benefits of plant
rationalisation and operational gearing from improving volumes. The 1Kerry
project has been addressing all the back office functions (finance, purchasing)
while also rationalising the number of Kerry plants globally (150 facilities in
25 countries). Kerry Ingredients margins increased 10bps, while Kerry Foods
margin fell 20bps and profits were behind forecasts reflecting the difficult
market background.
Underlying net debt was lower than forecast when adjusted for the acquisition
spend of €177m. The Pensions directive IAS 19 will be incorporated into
forecasts from FY13 (and retrospectively), with a net impact in EPS terms of
3.6c.
Overall the results were slightly better than expected, with continued
positive trends within the larger (78% of EBIT) Ingredients division. The
company is guiding 7-11% EPS growth in the current year. Assuming a mid-range
guide, this would imply a base EPS of 259c (Goodbody current forecast 259.9c),
from which 3.6c needs to be deducted for IAS 19, implying 255c for FY13. The
results statement does not change our overall stance on the stock which we rate
'Hold'."
DCC, the business services group,
today said it wants to seek admission to the London UK Index Series,
following a review of its listing arrangements.
The company said this will require cancelling of its shares on the Irish
Stock Exchange.
DCC's shares, currently traded on both the ISEQ and the London Stock
Exchange, but it will end its Irish listing in May and then trade only in
sterling in London.
DCC also said that it will change its reporting currency from euro to
sterling to reflect the fact that most of its group revenue and operating
profits are now generated in the UK in sterling.
Royalty Pharma, a US private equity group, which buys the rights to patented
drugs, on Monday made a bid to acquire Elan, the Irish-headquartered drugs
business, in a deal valuing the company’s equity at $6.6bn.
The $11-a-share move is seen as an effort to gain access to future income
from Tysabri, the multiple sclerosis (MS) drug jointly developed by Elan
that it this month sold to its US partner Biogen Idec for $3.25bn in cash
but with continuing royalties.
Elan’s board
in a response, calling the offer “highly opportunistic” and “heavily
conditional”, while highlighting that it would consider the bid alongside a number
of strategic options under discussion over the past year “to the benefit of our
public shareholders”.
Economic View 1: Agreement on further pay cuts a big step forward;
David O'Leary, chief economist of Goodbody, comments - - "Another potentially dangerous hurdle on the way to sustainable public finances
looks to have been crossed, with the confirmation of agreement between union
leaders and the government on a range of new cost-saving measures in the public
service. When the negotiations were called last November, we assumed that there
would be a long and drawn out process and that the government target of
end-February looked optimistic. In this regard, the conclusion of the talks,
with the required €1bn target agreed upon is a welcome surprise.
With regards to the actual measures, a range of reductions to public pay have
been agreed at the Labour Relations Commission. These include graduated pay cuts
ranging from 5.5% to 10% for public servants earning over €65,000, to increases
in working hours and reductions in overtime payments. These measures will now go
to union members in a ballot. Although the outcome of this ballot is still
uncertain, it is likely to go through given the fact that the government has
said it will legislate for pay cuts if the savings are not achieved through
negotiation. Moreover, the straight pay cuts only affect the c.20% of public
sector employed earning over €65,000.
This is the latest in a series of cost reductions in the public sector pay and
pensions’ bill and quite possibly the last. While there are still hurdles to
cross in the government’s fiscal consolidation strategy, public sector pay
reductions is potentially the most difficult from a political point of view.
Should this agreement be ratified by union members, this will represent a
significant step forward."
Economic View 2: Political instability back on the agenda after Italian election;
Dermot O'Leary adds -- "After a relatively stable period under the stewardship of Mario Monti’s
technocratic government, political instability looks like making a return to
Italy and the euro area. The results of the Italian election this morning show
an effective deadlock between the centre-left movement led by Pier Luigi Bersani
(29.5% in the lower house, 31.6% in the upper house) and the centre-right
movement led by Silvio Berlusconi (29.2% in the lower house, 30.7% in the upper
house). The big surprise appears to be the support garnered by Beppo Grillo, who
managed to get almost a quarter of the votes in both houses. With these results,
it appears unlikely that a stable government will be formed and puts another
election in the coming months on the agenda.
The effect on the euro has been immediate, falling close to $1.30 this morning,
relative to $1.33 yesterday afternoon. Italian ten-year yields have risen by 70
basis points to close to 5% once again, and other peripheral bond markets have
also seen increases in yields. While 5% is still a manageable level for Italy, a
prolonged period of political uncertainty suggests that yields may rise further
from here. It remains to be seen whether it may open up the possibility of
countries like Italy having to use OMT over the coming months.
We will have to wait to assess the full consequences of last night’s vote, but
it does highlight the political risks that are associated with the austerity
policies that are being pursued by politicians in the euro area."
Irish government reaches agreement on public sector pay:
Conall Mac Coille, chief economist of Davy, said: "Speculation on the Italian election result led to a volatile day's trading
yesterday. Stock indices fell sharply in late trading as a hung parliament
seemed the likely outcome. Markets largely shrugged off the news that Moody's
had downgraded the UK's triple-A rating. The UK 10-year gilt yield fell 3 basis
points on the day. That said, the sterling exchange rate fell sharply against
the euro and the dollar. The news that the Irish government has agreed a new
agreement to reduce public sector pay by €1bn is a welcome sign that it is
intent on reducing the bloated public sector pay bill.
Irish government reaches agreement on public sector pay
The Euro Stoxx 50 closed up 0.4% yesterday but the S&P500 fell 0.7%. The key
event yesterday was the Italian election. Stocks had rallied early in the day on
exit polls, suggesting that Pier Luigi Bersani's party had performed well enough
to form a majority and exclude Silvio Berlusconi from a new government. But
these gains were erased in late trading as a hung parliament became the most
likely outcome. The euro fell to a six- week low against the dollar at $1.31.
Macroeconomic data released today on house price inflation, new home sales and
consumer confidence will provide a clearer picture of the health of the US
economy. In this vein, Federal Reserve Chairman Ben Bernanke's congressional
testimony will be closely watched, not least given the recent mixed messages on
whether the Fed is committed to $85bn of asset purchases per month until labour
market conditions improve.
Sterling fell to its lowest level since July 2010 against the dollar yesterday
and to a 16- month low against the euro, following the news that Moody's
Investors Service had cut the Triple-A rating. As in recent US and French
downgrades, the ratings action had little impact on government bond yields. UK
gilt yields actually fell to 2.08%, by 3 basis points on the day, despite the
downgrade. However, the lack of an adverse market reaction to Moody’s decision
will probably increase the pressure on Chancellor George Osborne to relax the
pace of his fiscal consolidation plan in the March Budget.
Meanwhile, the Irish government appears to have reached agreement on a new Croke
Park agreement on public sector pay. The agreement is reputed to save around
€300m in 2013 and up to €1bn per annum by 2015. This compares with the €725m of
pay savings underpinning Budget 2013, the €458m bulk of which was expected from
the high spending Department of Health, €56m from the Garda Siochana and €220m
unallocated. However, the announced savings probably do not net out reduced tax
revenues as pay is cut. Nonetheless, given overshooting current expenditure and
undue focus on capital expenditure and job cuts, yesterday's agreement is a
welcome sign that the government is intent on reducing the bloated public sector
pay bill."
US Markets
In New York Monday, the Dow plunged 266 points or 1.55% to 13,784.
The S&P 500 slid 1.83% and the Nasdaq slipped 1.44%.
Asia Markets
The MSCI Asia Pacific
fell 0.6% in Tokyo Tuesday.
The Nikkei 225 dipped 2.26%;
China's Shanghai Composite Index dropped 0.50%; Korea's Kospi index fell 0.47%;
Australia's S&P/ASX 200 dropped 1.03% and in Mumbai, the Bombay Stock
Exchange's Sensex index declined 1.64%.
Europe Markets
In Europe, the
Dow Jones Stoxx Europe 600 is off 0.95% in mid-morning trading Tuesday.
In Dublin, the
ISEQ is up 0.06%.
CRH is up
1.05%; Kerry has risen 0.45%; Elan is off 0.05% and DCC is down 0.13%.
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 rose 3 points or 0.41% to 743 - - the BDI is
up 6.29% in 2013.
Crude oil for April 2013 delivery is currently
trading on the
Chicago York Mercantile Exchange (CME/Nymex)
at $92.31 down 80 cents from Monday's close. In London, Brent for April delivery
is trading on the
International Commodities Exchange at
$113.34. 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.
The spot price
of an oz of gold is trading in New York at $1592.20 down $1.40 from Monday's
closing New York.
Gold had hit a
record high of $1,921.05 a troy ounce on Sept 06, 2011.
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