|BP's Andrew platform in the North Sea|
The price of a barrel of Brent crude oil dipped below $100 for the first time
in nine months Tuesday as a selloff that began Monday continued.
Brent, produced in the North Sea, is the world's leading crude oil benchmark
Oil's drop which saw the front-month Brent crude oil contract on London's ICE
futures exchange down 72 cents at $99.91 a barrel in morning trading, following a
sharp fall in the price of gold and other precious metals in recent days and a
wider drop in commodity prices that has affected everything from agricultural
commodities to copper prices.
The front-month May light, sweet crude contract on the New York Mercantile
Exchange fell 47 cents lower at $88.31 a barrel.
Gold had its biggest one-day percentage drop in 30 years Monday as new signs
of a global economic slowdown emerged and fears abated that central banks'
easy-money policies would stoke inflation.
The Wall Street Journal said gold futures for April delivery fell $140.40, or
9.4%, Monday to a two-year low at $1,360.60 an ounce on the Comex division of
the New York Mercantile Exchange. That extended their bear-market descent of
more than 20% from their 2011 all-time high. Since Thursday, gold prices have
declined by more than $203 an ounce, a record skid since the futures began
trading in the U.S. in 1974.
The Dow Jones Industrial Average marked its worst one-day point decline since
Nov. 7, 2012, dropping 265.86 points, or 1.8%, to 14599.20.
Danone, the French food and drinks group, said today that sales
revenues rose 4.3% in the first quarter of the year, driven by growth in
The company reported €5.3bn in revenue in the three months from January to
Sales were strong in Asia, Latin America, the Middle East and Africa, where
revenue grew 13.2%.
However, almost 40% of Danone's sales comes from Europe, where the struggling
economy has hit retailers. Sales fell 5.2% there in the first quarter.
Food & Beverages Positive Q1 from Danone, Givaudan and Carr’s Milling: Liam
Igoe and Patrick Higgins of Goodbody commented - - "Danone reported 5.6% organic
growth in sales in its Q1 trading update this morning, which included a 3% lfl
volume growth (vs 2.6% expected). The company reaffirmed its full-year target of
over 5% sales growth. Product-wise, the baby nutrition business was the
stand-out feature with lfl sales growth of 17.1% (including lfl volume growth of
7.8%) driven partly by booming sales in Asia-Pacific, while medical nutrition
lfl sales were up 6.3%. The fresh dairy products area saw only modest growth
(+0.7% in value terms and +0.5% by volume). Geographically, Europe was weak
(-3.8%) but growth was robust elsewhere and strong in developing markets (+16.6%
by value, +8.2% by volume).
Givaudan, meanwhile, reported lfl sales growth in Q1 of 3.9% including 3.7%
in its Flavour Division. Growth appears to have been fairly well distributed
across all regions and beverage, dairy, snacks and sweet goods gaining due to
new business wins and existing portfolio growth.
Carrs Milling reported an 18.1% rise in its revenues and 36.2% increase in
pre-tax profits in its interim results this morning. The key driver of growth
was the positive performance within agriculture (+17.8% revenues) where animal
feed sales in the UK were very strong due to the adverse weather conditions
since last autumn.
The Q1 updates from Danone and Givaudan provide a fairly robust start to the
reporting season from the food sector. Danone’s strong lfl growth in its
nutritional products sets a positive backdrop for Glanbia whose main products
areas are within the nutritional space, including infant formula nutrition
(though mostly sports nutrition). Givaudan’s positive start set a positive tone
for Kerry’s ingredients prospects (we look for over 5% lfl growth in Kerry
ingredients in FY13). Carrs Milling comments will have a positive read-through
for Origin’s animal feed business, although the poor weather has also offset
these gains within AGRII due to the reduced level of winter cereal plantings in
Justin Doyle, Investec Bank Ireland, said today:
- "What had already been a pretty bad day in the markets morphed into a
very sad day generally as the terrible news broke last night of the double
- Prior to the news of the bombings, gold had just posted its largest
single day fall in just over 30 years. Since Friday morning, it has fallen
almost 14% with 9% of that drop occurring yesterday and as usual a lot of
players are scratching their heads and the conspiracy theorists are out in
- It seems however the massive drop is due to several different factors:
All time high long gold speculative positions, talk of Cyprus selling their
gold reserves to aid bailout pressures, weakening Chinese demand and key
technical support levels being broken which exacerbated the move;
- So as commodity prices and equity indices began to wobble so too did the
commodity/risk currencies with cross yen pairs taking the biggest hit of all
yesterday and overnight. The Australian dollar and the South African rand
fared particularly poorly overnight."
Economic View 1: Growth in incomes should support consumer spending;
Dermot O'Leary, chief economist of Goodbody, comments - - "With a pick-up in
employment and earnings, total household disposable income rose last year in
Ireland for the first time since 2008. These are the results of the latest
Quarterly Institutional Non-financial accounts and will come as a surprise to
some given the difficulties still being experienced by households in Ireland.
For the year as a whole, nominal household income rose by 2.5% to €86.3bn in
2012, helped by an increase in wages paid to employees and the earnings of the
self-employed. While disposable income rose by €2bn, consumer spending only grew
by €400m, meaning the rest went into savings (which includes paying down debt).
As a result, the savings ratio rose from 11.4% in 2011 to 13.3% last year.
Unfortunately, these data say nothing of the distribution of earnings in the
Irish economy. It is likely that a significant proportion of the population is
still experiencing declines in incomes due to either reductions in wages or cuts
to social welfare payments. However, there are segments of the population where
the situation is improving. We have seen this in the growth in some sectors of
employment, while upward wage pressures also exist despite a very high
unemployment rate overall.
As with all Irish data, the devil is in the detail. Nevertheless, the growth
in disposable income is to be welcomed and should at least support the signs of
stabilisation in consumer spending that started to emerge in the second half of
Economic View: Croke Park II vote on a knife-edge; Dermot O'Leary added -
- "The results of the vote on the Croke Park II Agreement (agreement between
unions and the government on further pay reductions) will be known tomorrow.
According to media reports this morning, the vote is extremely close, with a
chance that there is a tie.
The Government has said it will legislate for pay cuts if there is no
agreement, as it has agreed with the Troika that it would make the required
savings over the period to 2015. See our note this morning for more details."
Banks: KBC Ireland parent injects some capital in Q1: Eamonn Hughes and
Colm Foley of Goodbody commented - - "KBC Bank Ireland has received €125m of
capital from its parent in Q1 (according to filings in the company’s office
according to the Irish Independent) to expand its business here. The bank has
indicated that the injection is not to replenish its capital base but to allow
investment in the business, noting its tier 1 capital ratio was a reasonable
11%+ last December. KBC has a c.10% share of the Irish mortgage market, with
about €16bn of loans in total. Last year, the bank lost over €300m with the loss
(driven by €550m of impairments) about 14% wider than the prior year. At the
turn of the year, the bank announced plans to open new branches and expand its
retail offering in Ireland.
The tier 1 ratio of 11%+ at KBC compares to 15.1% at AIB and 14.4% at BOI at
the end of 2012, so it is still lower than peers. We expect these latter figures
to continue to erode from losses in 2013 and whilst KBC is indicating the
capital injection should foster investment in the business, it would also
potentially be available to absorb losses should they materialise in 2013,
similar to the forecast outturn for the main Irish banks."
Irish household savings remain high: Conall Mac Coille, chief economist
of Davy, comments - - "Stock markets fell sharply yesterday following poor
Chinese GDP data. Today's ZEW investor sentiment survey and US housing starts
data could have a significant bearing on investors' faith in the global
recovery. In Ireland, income data indicated that the gross savings rate rose to
12.5% in 2012, up from 10.7% in 2011. Nominal wage growth per head in 2012 was
1.7%, the strongest since 2008, up from 0.5% in 2011.
Irish household savings rise in 2012
Stock markets continued to fall yesterday – the Euro Stoxx declined 0.3%,
with the DAX down 0.4% and the CAC40 down 0.5%. The S&P500 fell by 2.3%. The
catalyst was poor Chinese growth numbers. Chinese GDP grew by 1.6% in Q1 2013,
well below analysts' expectations for 2% growth. Furthermore, industrial
production in March grew by 9.5% year-on-year but below the 10.1% expected.
Today's macroeconomic data could have a significant bearing on investors' faith
in the global economy. The German ZEW survey for April will be the first to
illustrate the full impact of the Cyprus banking fiasco on investor confidence.
The US housing starts release is expected to rise to 930,000 in March, up from
917,000 in February. Should housing starts disappoint, investors may question
the self-sustaining nature of the US recovery. That said, CPI inflation is
expected to fall back to 1.6% in March. This may alleviate fears that the US
Federal Reserve may curtail its QE programme in the near future.
Irish income data released yesterday indicated that the gross savings rate rose
to 12.5% in 2012, up from 10.7% in 2011. Nominal wages per head grew by 1.7% in
2012. This is the strongest growth in wages since 2008 and follows 0.5% growth
in 2011. Consumer prices rose by 1.8% in 2012, so real wages still fell
marginally despite 1.7% wage growth. That said, the recent decline in Irish CPI
inflation to just 0.5% in March indicates that there will be less pressure on
households' spending power from price pressures in 2013. Overall, yesterday's
data indicated that Irish households continued to pay down debt at a sharp pace
in 2012, reducing their consumption, despite positive wage growth."
In New York Monday, the Dow
fell 266 points or 1.79% to 14,599.
The S&P 500 slid 2.30% and
the Nasdaq slipped 2.38%.
The MSCI Asia Pacific fell
0.5% in Tokyo Tuesday.
The Nikkei 225 dropped
1.55%; China's Shanghai Composite Index fell 1.12%; Korea's Kospi dipped 0.21%;
Australia's S&P/ASX 200 declined 0.91% and in Mumbai, the Bombay Stock
Exchange's S&P BSE 100 index rose 0.52%.
In Europe, the
Dow Jones Stoxx Europe 600 is off 0.80% in mid-morning trading Tuesday.
In Dublin, the
ISEQ is down 0.65%.
CPL has fallen
Key Index Performance
Bank of Ireland Daily Report
The euro is
trading at $1.3105 and at £0.8562.
For live currency updates, check the right-hand
column of the Finfacts home
The US dollar
fell to $1.6038 per euro on Tuesday, July 15, 2008 - an-all time record.
The Baltic Dry
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,
the BDI rose 1 point or 0.11% to 876 - - the BDI is
up 22.89% in 2013
Crude oil for May 2013 delivery is currently
trading on the
Chicago York Mercantile Exchange (CME/Nymex)
at $88.31 down $27 cents from Monday's close.. In London, Brent for May delivery is
trading on the
International Commodities Exchange at
$99.91. The North Sea
benchmark accounts for two-thirds of the global market.
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.
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 $1385.30 up $24.70 from Monday's closing in New York.
Gold had hit a
record high of $1,921.05 a troy ounce on Sept 06, 2011.
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