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The Wall Street Journal reports that Microsoft
said that its quarterly dividend will rise by 5 cents to 28 cents per share, a
22% increase from the prior payout. The software giant also announced a new
stock buyback program of up to $40bn, saying it replaces a prior $40bn
repurchase plan that was set to expire Sept. 30.
The Journal said current investor angst springs
partly from the efforts of Steve Ballmer, the outgoing chief executive, to take
Microsoft in a new direction. He wants to shift the company from a focus purely
on software that is downloaded onto personal computers or on corporate computing
networks, into something of a hybrid of rivals Apple Inc. and Google Inc.
Microsoft is refashioning more of its software for the "cloud." The company also
is set to expand its homegrown computer-hardware business into smartphones with
the addition of Nokia and its 32,000 employees.
About 300,000 Barclays customers are to get unexpected windfalls of hundreds
of pounds as a result of a £100m sterling paperwork error by the British
From next month affected customers will receive
refunds of interest paid on personal loans - in some cases extending back five
years - with an average payout of more than £300.
Barclays said an error on minor technical issues
with customers' statements and arrears notices, such as failing to properly
record when someone changed a repayment date.
That resulted in the bank being in breach of the
Consumer Credit Act (CCA), forcing it to refund any interest paid since the
mistake was made.
Economic View: Primary surplus targeted by Minister Noonan: Dermot
O'Leary, chief economist at Goodbody comments - - "Irish Finance Minister
Michael Noonan appeared to move the goalposts somewhat yesterday in comments
regarding the on-going debate about Budget 2014. The Minister laid out the case
for a primary budget surplus for 2014. Although he did not mention a specific
number, the Irish Times suggests this morning that the Minister believes that a
negligible primary surplus will not suffice. Although the achievement of such a
target was already implied in the Government’s previous forecasts, its explicit
mention very much moves the focus on to both the economic forecasts for next
year and the September Exchequer Returns to find out how much room the
government may have.
According to the April Stability Programme
Update, containing the most recent set of government forecasts, the interest
bill for 2014 is estimated at 4.9% of GDP, meaning that a general government
deficit of 4.8% must be targeted to get to a primary surplus. At that time, the
government was forecasting a budget deficit of 4.3% of GDP. A “non-negligible”
primary surplus could be assumed to be 0.4%, implying a budget deficit target of
4.5% of GDP. With economic growth forecasts likely to be revised downwards, this
is likely to give the government only a small room for manoeuvre on the fiscal
consolidation targets, possibly in the range of €200m-€300m.
Given the Minister’s comments yesterday, the
debate over the coming weeks is likely to focus on the size of the primary
surplus that is targeted. However, the government will only know this when
forecasts are finalised. From a market point of view, the achievement of a
primary surplus sufficient to stabilise the debt level would send out an
Bank 1: Lloyds share sale will get investors thinking about position of other
banks; Eamonn Hughes and Colm Foley of Goodbody comment - - "UKFI, which
owns the UK government’s stakes in the UK banks, sold a c.6% stake (£3.2bn) in
Lloyds overnight at 75p in an accelerated book-building process. The
government’s stake reduces from 38.7% to 32.7%, with commitments of no further
sales for 90 calendar days. A possible retail offering is on the cards in H114.
The shares closed at 77p yesterday, 1.4x their end 2013 TNAV and the 75p placing
price is just above the alleged 73.6p at which the UK government breaks even on
Whilst share sales generate increased supply, the
market is likely to be enthused about reducing state ownership. The sale of the
Lloyds shares was flagged earlier in the summer but will no doubt get investors
thinking about shares in government owned banks across Europe and/or capital
raising exercises. In Ireland, the government owns 15% of BOI and 99.8% of AIB.
On the former, we anticipate that BOI may consider a capital raise in Q4
(November IMS might be appropriate timing) as part of a process to pay down its
government owned preference shares. At this stage, we would expect the State to
retain its shareholding in BOI should it look to undertake a capital raising
exercise, though will clearly be watching with interest in the Lloyds process.
Contrary to recent speculation that the Irish
State’s breakeven point on its BOI investment is 23c, we believe it is in the
high-20s. At AIB, the breakeven point is higher again. Nevertheless, the
objective of the government’s intervention previously was to avert a collapse of
the banks, so selling at a profit shouldn’t necessarily be a pre-requisite."
Banks 2: Danske Bank CEO is replaced;
Eamonn Hughes and Colm Foley of Goodbody add - - "In a surprise move yesterday,
the Danske Bank CEO was replaced. In the job for only 19 months, the board cited
requiring an executive with more banking experience as its reason for getting
rid of the former Maersk executive.
The move may herald a bout of cost cutting to
deliver on improved returns, but may also accelerate plans already put in place
around key strategic initiatives. On this point, Danske has been looking to run
down its non-core Irish loan book which was likely to be on a piecemeal basis,
with the intention that by end 2014 it would be substantially reduced.
The change in CEO may generate some speculation
that the pace of deleveraging of the non-core loan books, including Ireland, may
accelerate given that any new CEO looks under pressure to deliver sooner rather
than later. That may mean more loans/properties for sale quicker than envisaged.
This is of potential interest to our nascent REIT industry.
Ryanair Stansted deal to drive cost
savings: Dónal O'Neill of Goodbody comments --
"Ryanair announced yesterday a long-awaited deal with Stansted Airport owners,
MAG, which will see it grow from 13.2m passengers in 2012 to over 20m by
2019/2020. The growth will begin from summer 2014 and will deliver lower costs
(undisclosed) and more efficient operations in return for volume increases.
Ryanair will base 43 aircraft at the airport, up
from 37 currently and will add four new routes, bringing the total to 120. The
deal will last for 10 years and we expect passenger numbers at the airport grow
by c.1m in each the first five years which should account for up to 25% of all
Ryanair’s growth in the period to 2019.
This deal has been expected by the market since
MAG bought Stansted Airport in January this year. While there is no disclosure
on cost savings, we believe it is fair to assume, given RYA’s track record, that
the sheer volume of passenger growth is accompanied by meaningful cost benefits.
This deal will not change Ryanair’s guided growth profile as Stansted had always
been identified as a key target for additional capacity. We remain positively
disposed to the longer term investment case for Ryanair as its market share and
earnings power continues to expand, supported in the near term by cash
distributions and share buybacks. BUY."
Commenting, Justin Doyle, Investec Bank
1. Fed Decision In Focus: The US Dollar is trading closing to a four week low
against the Euro this morning as market participants await the outcome of the
Federal Reserve’s policy meeting which starts today. It is widely anticipated
that they will announce a modest reduction in its bond buying stimulus, with QE3
purchases down to $75bn from $85bn a month.
2. Yellen the New Favourite to Succeed Bernanke: Federal Reserve Vice Chair
Janet Yellen is now in poll position to replace Ben Bernanke when his term ends
in January next year. Larry Summers, considered by many to be Obama’s top pick
for the post, withdrew his application as it was thought that too many democrats
opposed his nomination. Markets now believe that there could be a more gradual
approach to tightening monetary policy as Janet Yellen is a well known policy
dove compared to Summers who is perceived to be relatively hawkish.
3. Sterling Comes Up against Strong Resistance: The pound is trading flat
against the single currency but there is a raft of economic data out of the UK
this week. Much of the focus in the UK will be around the retail sales figures
on Thursday which if strong should push sterling higher. However, before that we
have inflation data later this morning and Bank of England minutes tomorrow.
Minister of Finance indicates Budget
2014 adjustment may fall below planned €3.1bn: Conall
Mac Coille, chief economist at Davy, commented - - "Stock indices rose on
Monday: the Euro Stoxx closed up 1.0% and the S&P500 0.6%. The news that Larry
Summers had withdrawn from the race to be the next Fed President was interpreted
by markets as increasing the likelihood of easy monetary policy. The Irish
Minister for Finance has indicated that his primary goal is to achieve a primary
budget surplus in 2014. This raises the possibility that the Budget 2014
adjustment may fall below the €3.1bn originally planned given that Ireland looks
set to beat its deficit target in 2013.
Minister of Finance indicates Budget 2014 adjustment may fall below planned
Stock indices rose on Monday: the Euro Stoxx 50
closed up 1.0% and the S&P500 0.6%. The news that Larry Summers had withdrawn
from the race to succeed Fed President Ben Bernanke was viewed positively by
markets, with other candidates perceived as more likely to maintain easy
monetary policy. US Treasury bond yields fell 9 basis points to 2.8%. The dollar
also fell on the news, losing half a cent against the euro, trading close to
Sentiment also benefitted from the diminishing likelihood of military action
against Syria. US manufacturing output rose by a robust 0.7% on the month in
August, up 2.8% year-on-year. This follows the news that Chinese industrial
production growth accelerated to 10.4% in August and the broad improvement in
global PMI surveys for manufacturing. So yesterday’s US data are a welcome sign
that the global cycle in manufacturing output is turning up.
UK CPI inflation for August, to be released this morning, is expected to fall to
2.7%. Weak nominal wage growth close to 1% and the fall in the British Retail
Consortium measure of shop price inflation to -0.5% suggest underlying price
pressures are weak. However, with markets pricing in rate rises for late 2014,
any upward surprise could increase the pressure on new Bank of England Governor
Mark Carney’s forward guidance policy.
Yesterday, Irish Minister for Finance Michael Noonan indicated that his primary
goal for Budget 2014 is to achieve a primary surplus in 2014. This suggests
there may be room for a smaller budget adjustment than the €3.1bn originally
planned. Media reports suggest a €2.8bn adjustment is now envisaged.
Ireland’s latest April 2013 budgetary projections are for an overall deficit of
4.3% of GDP in 2014 and a primary surplus of 0.5%. However, exchequer returns up
to August suggest that Ireland is likely to beat its 7.4% deficit target by
around 0.5% of GDP, creating some room for flexibility heading into 2014.
However, the Department of Finance’s Budget 2014 deficit projections will be
heavily reliant on the 2013 Q2 GDP release this Thursday (September 19th) and
the October exchequer returns. Both of these releases could materially change
the outlook for the deficit in 2014."
In New York Tuesday, the
Dow is up 47 points or 0.30% to 15,191.
The S&P 500 added 0.24%
and the Nasdaq advanced 0.20%.
The MSCI Asia Pacific
Index dropped 1.5% Tuesday.
Japan's Nikkei 225 fell
0.65%; China's Shanghai Composite dropped 2.05%; Korea's Kospi index fell 0.39%;
Australia's S&P/ASX 200 added 0.06% and in Mumbai, the Bombay Stock Exchange the
S&P BSE India Sensex Index climbed 0.17%.