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News : International Last Updated: Jul 9, 2013 - 3:34 PM


Markets: Greencore reports positive Q1; AIB to close pension scheme
By Finfacts Team
Jul 9, 2013 - 12:06 PM

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François Hollande, French president, during the 9th stage of the 100th Tour de France (Bagneres-de-Bigorre), July 07, 2013 

UK-listed Greencore: Positive Q1 update from M&S; Liam Igoe of Goodbody comments  -- "M&S reported an improvement in its food sales in its Q1 to end June this morning. Lfl sales for foods were up +1.8% compared with +0.6% in the previous quarter. Total UK food sales increased by 4.5%. In what was described as “another excellent quarter” Greencore said its sales were well ahead of the market.

The comments set a positive backdrop for Greencore’s Uniq business, which is a key supplier into M&S. While we are assuming overall flat underlying sales in the UK for FY13 we do expect that its M&S business will see growth (3%). The current good summer weather will also be a positive factor for sales of convenience foods."

Éanna Black, Investec Bank Ireland, said today:

  • "Yesterday the U.S. 10 year yield sank back to 2.66% from Fridays post US employment data high of 2.75%, and the dollar followed it lower against the Euro;
  • On the back of this retracemenent in key US rates and the ECB’s Draghi reiterating just how challenging the European economy is risk assets were supported, as European equities outperformed their peers;
  • On news that coalition had been salvaged in Portugal, Portuguese 10 year bonds rallied 20 basis points to close below 7% for the first time in almost a week;
  • In Emerging markets the Central Bank of Turkey spent almost 2% of their reserves in attempting and succeeding to stem the Lira’s slide against the US dollar. They used 2.25 billion U.S dollars, which paints a picture of how difficult Emerging Markets currencies will find it as US yields continue to rise and support Dollar strength."

Irish Financials – AIB set to close DB pension scheme: "The Irish Labour Court yesterday endorsed Allied Irish Banks' (AIB) plan to close its defined benefit plan for future accrual from December 31 and transfer beneficiaries to a defined contribution scheme. The Labour Court has also recommended that staff work longer hours, with a one-off payment equivalent to 4% of salary to those below manager grade to be offered as compensation. According to press reports this morning, AIB could save up to €200m a year under the proposed arrangement.

AIB's fellow 'pillar bank', Bank of Ireland (BKIR), is currently engaged in discussions with stakeholders over its defined benefit pension schemes, which had a deficit of €1.2bn at end-2012. Under Basel III, BKIR must deduct its €1.2bn pension deficit (which equates to circa 2.0% of risk weighted assets) from core tier 1 capital. With the group weighing up its options ahead of a likely refinancing of €1.8bn of government-owned preference shares before they step up by 25% at end-March 2014, any material benefit to BKIR from restructuring its pension arrangements would have a profound impact on the arithmetic around a refinancing. In particular, a substantial reduction in the deficit may give the bank additional scope to minimise the equity component of any potential capital raise to refinance the preference shares."

Economic View: Further signs of recovery in UK; Juliet Tennent of Goodbody comments  - - "The RICS House Price Survey for June, released this morning, rose to 21%, its highest level since January 2010 and well ahead of expectations of a modest increase to 8%. This underlines the stronger trend in property market indicators, which has been in train throughout the second quarter of 2013. Encouragingly, the new buyers’ enquires (38) and the new instructions (12) sub-indices continued to show strength, with the former rising to its highest level since August 2009. Thus the underlying supply demand dynamics remain positive ahead of the summer with the Funding for Lending Scheme and the Help to Buy schemes both lending support.

The BRC retail sales monitor was also firm in June with lfl sales values rising by 1.4%yoy, boosted by sales of clothes and shoes. While this is a slower rate than that seen in May (+1.8% yoy) it represents a solid performance from retailing in the month.

Further confirmation that the UK economy is gathering momentum is evident in both the June’s RICS and BRC, indicating that Q2 GDP growth will be better than that seen in the first quarter.

Gaming Irish betting bill due to be discussed today: Gavin Kelleher and Rachael Cairns comment - - "According to the Irish Times this morning, the Irish betting amendment bill is due to be discussed today by the government, which could see it given the go-ahead to publish. This bill includes the introduction of a 1% turnover tax on betting online and 15% commission tax on exchanges. It will then go to the EU Commission for approval (which can take up to three months) and then be signed into law later this year.

We have already included the Irish betting tax in our forecasts for Paddy Power for the six months in H213 (€2.9m) and so the delay will be a marginal positive. In terms of Betfair, we have c. £1m included for the Irish betting tax for FY14."

Little room for complacency heading into Budget 2014: Conall Mac Coille, chief economist at Davy, comments - - "DAVY VIEW: Stock indices closed up Monday. The Euro Stoxx rose 2.1% and S&P500 0.5%. The euro pared back previous losses against the dollar and is currently trading at just under $1.29. This morning, we have published a review of the outlook for the public finances. With six months of the budget year completed, the government has a safety buffer worth around €800m, or 0.5% of GDP, to hit its 7.4% of GDP deficit target. However, with the medium-term budgetary projections still assuming a robust pick-up in economic growth, downside risks from the euro-area mean that there is little room for complacency heading into the Budget for 2014.

Stock indices closed up Monday on optimism on the growth outlook, but amidst thin trading. The Euro Stoxx 50 closed up 2.1% and the S&P 500 0.5%. The euro pared back some of its previous losses against the dollar and is currently trading at just under $1.29, up from lows close to $1.282. Similarly, US 10-treasury yields retreated through the day from a peak of 2.75% to close to 2.65%.

This morning, we have published a review of Ireland’s public finances, following the publication of the April Stability Programme update, and with the exchequer returns for the first half of the year complete. In the first six months of 2013, the government has built up a safety buffer of close to €800m, or 0.5% of GDP, to ensure it meets its deficit target of 7.4% of GDP. However, an additional element of uncertainty surrounds this year’s out-turn as the full costs of liquidating IBRC have yet to be determined.

As in previous years, conservative assumptions on items such as ELG fees and Central Bank surplus income explain the strong revenue performance relative to the Budget projections, rather than unexpected buoyancy in taxes. This means that there is little room for complacency heading into the Budget for 2014.

The medium-term projections still rely on a robust pick-up in economic growth. The possibility of delayed euro-area recovery still represents a substantial downside risk to the government’s plan to reduce the deficit below 3% of GDP by 2015. Moreover, the key safety valve within the budgetary arithmetic, ELG fees, has now been removed following the end of the bank guarantee."

US Markets

In New York Monday, the Dow rose 89 points or 0.59% to 15,225.

The S&P 500 gained 0.53%; the Nasdaq added 0.16%.

Asia Markets

The MSCI Asia Pacific Index rebounded Tuesday with a gain of 1.6% Tuesday.

The Japanese Nikkei 225 rose 2.58%; China's Shanghai Composite added 0.37%; Korea's Kospi index advanced 0.74%; Australia's S&P/ASX 200 added 1.50%; in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index climbed 0.59%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600 is up 0.57% in morning trading Tuesday.

In Dublin, the ISEQ has risen 0.20%.

Greencore is up 1.72% in London.

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 $1.2860 and at £0.8664.

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 the BDI rose 16 points or 1.46% to 1,115.

Crude oil for August 2013 delivery is currently trading on the Chicago York Mercantile Exchange (CME/Nymex) at $102.98 down 16 cents from Monday's close. In London, Brent for August delivery is trading on the International Commodities Exchange at $107.28. 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 on the CME in Chicago at $1,254.60, up $19.60 from Monday's closing.

Gold had hit a record high of $1,921.05 a troy ounce on Sept 06, 2011.

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