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News : International Last Updated: May 8, 2014 - 6:20 AM


Markets: HSBC posts 20% drop in Q1 profit; CRH reports strong start to 2014
By Finfacts Team
May 7, 2014 - 3:34 PM

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Hong Kong and Shanghai Bank, founded in Hong Kong 1865 Photo: Flckr richardwonghk3

Reuters reports that HSBC's first-quarter pretax profit fell 20% from a year ago to just under $7bn, as revenue fell in Brazil and at its investment bank, while last year's earnings were swelled by asset sales.

Europe's biggest bank, which operates across 75 countries, said revenue prospects were decent in Asia but weaker in Latin America, where it has retreated from many markets after a difficult few years.

"Latin America is under a bit of pressure, particularly in Brazil. Overall Asia remains broadly constructive and everywhere else is generally stable," Iain Mackay, finance director, told analysts and reporters on a conference call.

The London-based bank said revenue fell to $15.88bn for the three months ended March 31, compared with $18.42bn in the year-earlier period.

CRH, the building materials giant, reported that the improving trend in the second half of last year in Europe continued into the first four months of 2014 as the economic backdrop continues to improve.

CRH: A comforting statement and on track to return to growth in 2014: Robert Eason of Goodbody commented - - "As expected CRH has reported a strong start to the year in Europe but faced more challenging markets in the US. Management is guiding first half EBITDA of €0.5bn and second half EBITDA to be somewhat ahead of last year’s €1.08bn. Our forecasts are for H1 EBITDA of €494m (+24%) and 13% growth in H2. At first glance, we do not envisage making material changes to forecasts.

In terms of the portfolio review, at the time of the results management noted that businesses equivalent to 70% of assets were core, 20% were under review and 10% were going to be sold. Today it has announced that 80% of the groups’ net assets are in businesses that meet the management’s strategic and financial criteria.

Regionally, European sales are up 10% lfl in the first four months, led by Products +16% (weather and improving sentiment in major markets) which is ahead of our estimates. Lfl growth in European Materials at 8% was a bit weaker than expected, with the backdrop difficult in Finland (cement vols -5%) but this was more than offset by strong growth in Poland, Ukraine, Switzerland and Benelux. Underlying growth in European distribution of 8% was as expected. The backdrop was more challenging in the US with adverse weather to the fore, resulting in lfl sales of +4% in Materials (slightly ahead of our expectations), +3% in Products (in-line) and -2% in Distribution (slightly behind).

Today’s statement gives us confidence that CRH is on course to return to earnings growth in the current year, in line with management and Goodbody expectations. This, coupled with potential upside from the portfolio review process, underpins our positive stance on the company. We reiterate our BUY recommendation with a PT of 2520c offering nearly 20% upside from current levels."

Aer Lingus Improved traffic stats for April as Easter provides boost: Jack Diskin of Goodbody commented - - "Aer Lingus passenger traffic for April shows a return to strong growth in long haul and a healthy rise in passenger numbers on its short haul network, as Easter helped support both passenger numbers and load factors. Overall mainline passenger numbers increased by 10% yoy with long haul increasing by 32%, and short haul growing by 7%. Load factor for the mainline business improved by 7pts to 76% with long haul up 8.6pts to 78%, and short haul up 5.5pts to 74%. Capacity for the month was up by 7% with long haul up 22% and short haul capacity flat. Aer Lingus Regional has continued its strong growth, with passenger traffic up 35% to 112k. Including the Regional business, Group passenger volumes grew by 12%.

Capacity growth and passenger numbers on long haul were boosted by the opening of the new Toronto and San Francisco routes, with Easter providing a welcome additional benefit. These two routes are expected to provide 19% ASK growth on transatlantic routes in 2014, with the group forecasting overall transatlantic growth of 24%. Hence, long haul growth will be far more pronounced for the remainder of the year, compared to the modest 2.7% growth seen in Q1.

This morning’s numbers reflect the strength of the Easter effect. We continue to expect that pricing will improve through the summer period and throughout the remainder of the year as these new long haul routes begin to mature. With capacity in the short haul market likely to be tight over the summer, and with forward bookings and early performance on the new long haul routes matching management’s expectations, we remain optimistic on the outlook for Aer Lingus."

Manufacturing sector benefitting from upturn in Europe: David McNamara, economist at Davy, commented - - "Stock indices in the US and Europe closed down on Tuesday despite improved PMI surveys, adding to evidence that the recovery gained a little traction in April. Asian markets were also lower overnight as China services PMI slipped to 51.4 from 51.9. In Europe, markets will focus on industrial production releases across the eurozone in the next few days, with modest growth expected again in March.

With most of the blockbuster drugs manufactured in Ireland coming off patent between 2011 and 2013, the impact of the patent cliff may have started to wane in the early months of 2014. Indeed, an improvement has been evident in the export data with nominal exports up 6.6% year-on-year (yoy) in the three months to February, while industrial production was up 5.3% yoy. Today’s industrial production release for March will provide a fuller picture of the sector in Q1, but PMI surveys point to the traditional manufacturing sector benefitting from the upturn in key markets in the UK and Europe. So industry may well add to GDP growth in Q1 following the sharp decline in H2 2013.

Nevertheless, despite no evidence of larger blockbuster drugs coming off patent this year, the impact of the 2013 expirations may yet hit the data this year due to the lag between patent expiry and the actual decline in drug prices. Indeed, any company can obtain a temporary extension in patent protection. We therefore cannot discount further hits from the pharmaceuticals sector depressing output and exports as these drugs eventually come off patent."

US Markets

In New York Wednesday, the Dow rose 27 points or 0.35% to 16,458.

The S&P 500 added 0.29% and the Nasdaq advanced by 0.20%

US benchmark updates

Asia Markets

The MSCI Asia Pacific Index lost  0.2% Wednesday.

Japan's Nikkei 225 fell 2.93%; China's Shanghai Composite slid 0.89%; South Korea's KOSPI dropped 1.00% and Australia's S&P/ASX 200 dipped 0.83%; and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index declined 0.82%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600  is up 0.04% in mid afternoon trading Wednesday.

In Dublin, the ISEQ  is off 0.76%.

CRH is down 3.30%.

European Benchmarks

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3930 and at £0.8212.

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 May 21, 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 3.11%, to 1,619 points, Bloomberg report.

On Tuesday in London the BDI closed up 5 points or 0.49% to 1,022. The index is down 55.12% year to date and up 14.96% in 12 month period.

The index rose by 220% in 2013 to 2,237.

Global rebalancing — the tanker scrapyard index?

Crude oil for June 2014 delivery is trading on the Chicago York Mercantile Exchange (CME/Nymex) at $100.41 up 91 cents from Tuesday's close. In London, Brent for June 2014 delivery is trading on the International Commodities Exchange at $107.56. The North Sea benchmark accounts for two-thirds of the global market.

Finfacts, July, 15, 2013: US West Texas Intermediate oil benchmark jumps in July - - margin between WTI and Brent falls.

Gold spot price

The spot price of an oz of gold is trading on the CME in Chicago at $1,295.50 down $12.80 from Tuesday''s closing - - the gold price fell 28% in 2013, the biggest annual plunge since 1981.

Gold had hit a record high of $1,921.15 a troy ounce on Sept 06, 2011.

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