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Shinzo Abe, Japan's prime minister, celebrates in Buenos Aires, Saturday, Sept 07, 2013, the award of Tokyo as the site of the 2020 Summer Olympic Games. It last hosted the games in 1964.
Reuters says the Tokyo bid committee estimates the world's third-biggest economy will get a boost of more than ¥3tn yen ($30bn) with the creation of 150,000 jobs. The Nikkei stock index gained 2.5% on Monday, while some analysts predict a short-term boost of 10%. The examples of the London and Athens suggest a one- to three-month rally after winning the right to host the games.
The Banque de France, France's central bank,
today raised it estimate of third quarter growth to 0.2% from 0.1% while in
Tokyo, the Cabinet Office announced a revision in April-June GDP (gross domestic
product) to an annualized 3.8% expansion from a preliminary 2.6% increase.
France's central bank said August saw another
slight rise in industrial production in most sectors, notably in electrical and
electronic equipment, chemicals and pharmaceuticals. Deliveries increased,
leading to a fall in inventories of finished goods, which are now deemed to be
at appropriate levels. New orders improved and order books are no longer
Commodity prices have been rising for two months
while prices of finished goods have remained stable. There was also a pause in
the decline in staff levels and cash positions continued to improve.
The bank said an acceleration of the industrial
activity is expected for September.
In services, activity improved, driven by a rebound in the transport services,
hotel and catering, and architecture and technical engineering sectors.
Temporary work increased slightly and staff levels rose and prices stopped
Cash positions continued to improve and business
managers expect services activity to continue expanding in September.
In Japan, on a quarter-to-quarter basis,
GDP growth was revised up to a 0.9% increase from a preliminary 0.6%, with the
help of rising capital expenditure.
At the weekend, Japan was boosted by the
selection of Tokyo as the site for the 2020 Summer Olympic Games.
Almost six out of ten loan applications
made by small businesses in the last three months were turned down by the main
banks, according to a survey by the Irish Small and
Medium Enterprises Association. ISME’s Quarterly Bank Watch Survey shows that
57% of funding applications made in the past quarter were refused, up from a
rejection rate of 44% seen in the last quarter.
The survey also found that, on average, the
length of time it took for a decision to be given by a bank had increased from
four weeks to five. However 14% of initial bank decisions were made within one
week – a 1% improvement on the previous quarter.
More than 1,020 owner-managers of SMEs responded
to the survey, which represents 14.7% of those asked.
Banks: Latest SME survey shows lending tightens
further; Eamonn Hughes and Colm Foley of Goodbody commented -- "In its
latest quarterly survey of SME lending activity, ISME (the Irish Small and
Medium Enterprises Association) reports that the rate of loan refusals moved up
from 44% to 57% over the past three months. The survey of over 1,000 SMEs also
indicated that demand for bank credit dropped from 41% to 36% in the same
The uptick in refusals reverses earlier positive
trends, so will be seen as a disappointment and highlight the ongoing weakness
in the domestic economy, the key driver for demand in the SME sector.
Escher Group H113 results,
pipeline encouraging; Rachael Cairns of Goodbody commented -- "Escher
Group has reported H113 results this morning with group revenue +48% yoy to
$12.9m and EBITDA (company definition) +28% to $2.4m, both in line with guidance
given in its trading statement at the end of July. Adj. EPS was 3.9c, down 14%
yoy and behind our 4.1c estimate.
Licence revenue came in at $2.6m, +58% yoy and
21% ahead of our forecast due to more licence revenue coming in from the USPS
contract from implementation stage than what we forecast. Maintenance revenue
was +3.5% yoy, largely in line with our forecast and support revenue +2.5% yoy
to $1.5m was behind our estimate of $2m. On the services line, revenue was +103%
yoy to $6.1m, marginally ahead of our $6m estimate. This was driven by the
services revenue coming in from the USPS contract implementation.
The statement highlights that the group’s
financial performance for the year is largely dependent on the recognition of
licence revenue coming from the USPS contract ($8m approx. due in H2). It notes
that progress is continuing and as previously guided it is expected that rollout
will commence later this year.
The group notes that a number of post offices are
going to tender or are entering preliminary discussion stages, which provides a
positive backdrop for growth in its Riposte product. In RiposteTrex, management
notes that it has seen significant interest and activity in 2013 with the group
short-listed for a number of eGovernment tenders. It expects that these projects
have the potential to generate revenue in 2014 but will require further
investment in the medium term. The statement notes that the group is looking at
eight or nine opportunities in this area compared with one or two a year ago.
We are unlikely to make any significant changes
to overall forecasts this morning apart from some small changes to the mix. We
would note that the risk to forecasts for 2014 and beyond remains to the upside
given a healthy pipeline across both Riposte and its interactive products (Trex
and NFC). Based on our forecasts, the group is currently trading at 28% below
our 330p price target.
Economic View: Government to ease back
on €3.1bn austerity measures; Dermot O'Leary, chief
economist of Goodbody said - - "It appears that the Irish government will go
against the wishes of the Troika in next month’s budget by targeting a lower
consolidation than the €3.1bn previously laid out.
Yesterday’s Sunday Business Post revealed that
while the final amount is not yet finalised, both parties within government have
agreed that the scale of austerity to be introduced in 2014 will be less than
previously set out. Fine Gael has laid out a preference for an adjustment of
€2.8bn, while Labour is pushing for €2.5bn. Given how politics work, it is
likely to be somewhere in between the two.
While the Troika would have preferred Ireland to
stick to its original targets, we doubt that a change of €400m or so will cause
too much consternation. In our view, the decision to ease the amount of
austerity for 2014 is the correct one. Our forecasts put the deficit at 4.3% of
GDP if the government went ahead with the €3.1bn adjustment, giving €1.3bn of
headroom to the 5.1% of GDP Troika target for next year.
From a market point of view, there are important
milestones to reach next year. Hitting a budget deficit target of 5.1% of GDP is
not one of them. However, a headline deficit of below 5% should be set: (i)
getting below that psychological level is important, and; (ii) such an
achievement would mean that Ireland moves into a primary surplus.
There is likely to be much more speculation on
the budget over the coming weeks. The debate now will move on to the make-up of
the adjustment. As we laid out in our Q3 Health Check, an increase in capital
spending would be welcomed, especially in light of the persistent underspend in
this area in the year to date."
Improving European cycle helping Irish
industry: Conall Mac Coille, chief economist of Davy,
comments -- "Equities gained on Friday: the Euro Stoxx 50 rose 1.0% but
the S&P500 was flat on the day. US non-farm payrolls rose by 169,000 in August,
weaker than expected, raising doubts on whether the Fed will taper its $85bn
monthly asset purchases at its September meeting. However, risk appetite was
held back by comments from President Putin that Russia will help Syria should it
be attacked. Having broken through 3% in early trade Friday, US bond yields fell
back, closing at 2.92%. Similarly, German bund yields fell to 1.96%, having
risen above 2% on Thursday.
Overnight, Japanese GDP growth in Q2 2013 was revised up to 0.9%, mainly due to
stronger business investment spending (+1.3% versus the 0.1% contraction
estimated previously). The news that Tokyo will host the 2020 Olympics, together
with encouraging Chinese trade data (exports up 7.2% yoy in August), buoyed
sentiment in Asian stock markets overnight. The Nikkei gained 2.5%. However,
European stock index futures point to only small gains at the open today.
UK manufacturing output rose by 0.2% in July following a 2% gain in June, up
0.9% three-month on three month. However, there was a sharp deterioration in the
UK trade balance to £3.1bn in July, driven by a 16% fall in goods exports to
Irish industrial output fell by 8.7% on the month in July, reversing the 9.3%
rise recorded in June. These volatile movements in output reflected the
multinational sector, down 9.0% on the month. In contrast, traditional sector
output fell by just 1.9% in July, albeit still up 0.1% three-month on
three-month and by +1.6% on the year. The traditional sector accounts for around
one-third of industrial output but two-thirds of aggregate employment.
The underlying picture is that an improving European industrial cycle is now
feeding through into better conditions for Irish manufacturers. European
industrial production recorded its first annual rise in June 2013 for almost two
years. Output in the Irish traditional manufacturing sector has now started to
expand, in tandem with improving European conditions. This suggests Irish
industrial employment is likely to expand further, contributing to the broader
recovery in the labour market.
The MSCI Asia Pacific Index climbed 1.4% Monday,
as Japanese shares gained to a one-month high after Tokyo won its bid to host
the 2020 Olympics.
Japan's Nikkei 225 jumped
2.48%; China's Shanghai Composite rose 3.39%; Korea's Kospi index gained 0.99%;
Australia's S&P/ASX 200 added 0.71% and in Mumbai, the Bombay Stock Exchange the
S&P BSE India Sensex Index climbed 1.53%.