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News : International Last Updated: Jul 1, 2014 - 4:11 PM


Markets: BNP Paribas admits crimes in US court; UK manufacturing was robust in June
By Michael Hennigan, Finfacts founder and editor
Jul 1, 2014 - 2:06 PM

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BNP Paribas SA, France's biggest bank, on Monday agreed to pay almost $9bn and plead guilty to crimes for violating US sanctions, in a record settlement that includes a year-long ban on the French bank's ability to conduct certain US dollar transactions.

The Wall Street Journal reports that US officials, in a Washington news conference and a Manhattan courtroom, laid out in stark terms a sophisticated and long-running scheme by BNP Paribas to disguise billions of dollars in financial transactions in violation of American sanctions against Sudan, Iran and Cuba—despite warnings by some within the firm about the legality, and morality, of the transactions.

"BNP Paribas went to really elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities. These actions represent a serious breach of US law," Attorney General Eric Holder said.

The bank, putting profits over the law, set up an intricate web of "satellite banks" designed to disguise its role in illicit transactions, according to the government complaint. For instance, a Sudanese bank seeking to move U.S. dollars out of Sudan transferred funds internally within a BNP satellite bank, which then transferred the money to the Sudanese bank's "intended beneficiary" without reference to the Sudanese bank.

Markit said today that at 57.5 in June, up from 57.0 in May, the headline seasonally adjusted UK purchasing manager’s index (PMI) posted its second-highest reading in 40 months, bettered only during this period by last November’s 57.8. The PMI has now signalled expansion throughout the past 16 months. Furthermore, the average index reading during the second quarter is the highest since Q1 2011.

Manufacturing output increased for the sixteenth successive month in June. Although the rate of growth eased to a three-month low, it stayed elevated and sufficient to ensure the average pace over the second quarter as a whole was the strongest for 20 years. The latest survey saw robust

The level of incoming new business rose at the fastest pace since November 2013 and to one of the greatest extents since the survey began in 1992. The domestic market remained the prime source of new contract wins, although inflows of new export business also strengthened.

UK manufacturers reported growth in new work received from clients in Europe, Asia and the Middle East. There was also mention of companies making a further push into new markets aided by new product launches and the brightening economic situation. Subsequently, the rate of increase in new export orders accelerated to a five-month high.

Manufacturing employment rose for the fourteenth successive month in June, as improved inflows of new business and increased production encouraged firms to expand capacity. The steepest rate of job creation was registered by SMEs, although large-scale producers also reported a solid increase to payroll numbers.

The National Treasury Management Agency (NTMA) announces that it will hold one bond auction during the current calendar quarter. The auction is scheduled for Thursday, 10 July 2014, subject to market conditions. Details will be announced on Monday 7 July.
The NTMA will offer buyback and switch terms, through recognised Primary Dealers, for the 4.6% Treasury Bond 2016, with the transaction to take place in the near future subject to market conditions.

The debt agency said that a Treasury Bill auction will take place on Thursday 18 September 2014, subject to market conditions. Details of the Treasury Bill auction will be announced on Monday 15 September.

The Bank of Japan has released its quarterly Tankan business survey for April-June quarter on Tuesday, showing that sentiment among major manufacturers fell to +12 in June quarter from +17 in March quarter, hit by temporary pullback in consumption caused by the April sales tax hike. But sentiment for the sector is expected to improve slightly to +15 in September as recent data have shown that demand for some goods and services is recovering. Business investment plans for this fiscal year through March 31, 2015 among large firms are forecast to rise 7.4%, revised up sharply from +0.1% projected in March.

The Bank of Japan has released its quarterly Tankan business survey for April-June quarter on Tuesday, showing that sentiment among major manufacturers fell to +12 in June quarter from +17 in March quarter, hit by temporary pullback in consumption caused by the April sales tax hike. But sentiment for the sector is expected to improve slightly to +15 in September as recent data have shown that demand for some goods and services is recovering. Business investment plans for this fiscal year through March 31, 2015 among large firms are forecast to rise 7.4%, revised up sharply from +0.1% projected in March.

Irish bank lending continues to contract: Conall Mac Coille, chief economist at Davy comments -  - "Stock indices were little changed on Monday: the Euro Stoxx 50 rose marginally by 0.01% and the S&P500 fell by 0.04%. Commentators suggested that investors were reluctant to take strong positions ahead of a slew of US macroeconomic data, starting with this afternoon’s manufacturing ISM and finishing with non-farm payrolls released on Friday. Overnight, Chinese manufacturing PMI surveys were revised marginally but still indicated that the sector expanded in June. Euro area PMI surveys will be released this morning.

The Irish manufacturing PMI released this morning rose to 55.3 in June, up marginally from 55.0 in April. Companies reported new orders expanding at their fastest pace since February 2011. Furthermore, Irish manufacturing companies increased their employment for a 13th consecutive month. So the prospects for the Irish manufacturing sector look relatively good. That said, trade data for early 2014 suggest that the pharmaceutical sector could hold back aggregate output figures for Irish manufacturing again in 2014 despite better performance from indigenous manufacturers and rising employment in the sector.

Data released yesterday showed Irish bank lending to households down 3.7% in the year to May. Lending for house purchases contracted by 3.0% and consumer credit (and other loans) by 5.8% on the year. Clearly, repayments of existing mortgage debt by households who bought during the bubble years in the early 2000s continue to far outpace new mortgage lending, just €2.5bn in 2013.

Loans to non-financial companies (NFCs) recorded their strongest positive monthly flow in 18 months in May, but this rise is most likely a blip. Non-performance among corporate and SME loans remains high, with Irish companies still repairing their balance sheets by paying down bank debt. The stock of bank credit to NFCs fell by 5.5% in the year to May 2014, albeit a slightly slower pace than the 6.2% decline in the year to April.

So there is little sign that the pace of contraction in the stock of Irish bank lending is easing, with repayments of existing debt still exceeding weak demand for new loans. As we recently set out in our June issue of Davy Economics Monthly, “Assessing the opportunities for Irish banks to grow their lending”, the onus is now on Irish banks to take advantage of a more concentrated financial sector as the aggregate pool of credit contracts."

Economic View: Asking prices continue to harden: Dermot O'Leary, chief economist of Goodbody, comments - - "Similar to myhome.ie report yesterday, daft.ie report this morning that asking prices in the Irish housing market increased strongly in the second quarter of the year. Asking prices grew by 3.7% in the three months to June, and were up 9.6% yoy.

This is significantly higher than the numbers reported by myhome.ie yesterday (1.3% qoq, - 1.7% yoy), reflecting the different samples in the data. However, the theme of very strong growth in asking prices in the Dublin market is common to both reports. Between April and June, asking prices rose by 8.6%, the fastest rate of increase since Q2 2006. Asking prices in the capital are now up 21% yoy and by at least 25% across the different parts of Dublin relative to the trough (but in some parts by up to 40% from the trough). We have consistently pointed out the role that low stock levels are having on Dublin prices. This continues to be a feature, with less than 3,000 properties on the market. In Q2, there was an increase in the number of properties put on to the market, possibly reflecting increased confidence or a lower incidence of negative equity. It will be interesting to see whether this continues to be a feature in the coming months.

Although asking prices continued to fall in some areas (particularly in the midlands and west) in Q2, falling supply levels in the urban areas in particular will continue to push up prices. While there has been some signs of a supply response in Dublin, it will not be quick enough to stall relatively rapid price increases in the short-term.

First Derivatives Receives £3.9m grant from Invest NI: Rachael Cairns of Goodbody comments - - "First Derivatives announced yesterday that it is to receive a grant from Invest Northern Ireland for £3.9m to support the expansion of its employee base. The Group will add 484 hires and will recognise the income accordingly.

Overall, this is a positive announcement for First Derivatives. While this number would have been largely captured in our forecasts already, it is helpful to now have visibility on this number. We retain our positive view on First Derivatives as we believe the group can continue to deliver impressive growth rates. We reiterate our BUY recommendation."

Manufacturing output rose in China, Japan, India in June; Contracted in South Korea

Eurozone manufacturing output losing momentum; June regional easing, dips in France and Greece

Irish manufacturing output rises but not matched by sales value

US Markets

In New York Monday, the Dow fell 25 points or 0.15% to 16,827.

The S&P 500 lost 0.04% and the Nasdaq advanced by 0.23%

US benchmark updates

Asia Markets

The MSCI Asia Pacific Index gained 0.3% Tuesday to extend a six-year high.

Japan's Nikkei 225 rose 1.08%; China's Shanghai Composite added 0.10%; South Korea's KOSPI fell 0.16% and Australia's S&P/ASX 200 dropped 0.27%; and in Mumbai, the Bombay Stock Exchange the S&P BSE India Sensex Index climbed 0.40%.

Europe Markets

In Europe, the Dow Jones Stoxx Europe 600  is up 0.56% in mid afternoon trading Tuesday.

In Dublin, the ISEQ  is up 0.27%.

CRH is up 0.96% and Ryanair has added 0.48%.

European Benchmarks

Irish Share Prices

Euribor Rates

AIB Daily Report

Bank of Ireland Daily Report

Currencies

The euro is trading at $1.3685 and at £0.7978.

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 Monday in London the BDI closed up 19 points or 2.29% to 850. The index is down 62.67% year to date and off 27.91% in 12 month period.

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

Global rebalancing — the tanker scrapyard index?

Crude oil for August 2014 delivery is trading on the Chicago York Mercantile Exchange (CME/Nymex) at $105.71 up 34 cents from Monday's close. In London, Brent for August 2014 delivery is trading on the International Commodities Exchange at $112.37. 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 $1,328.00 up $6.20 from Monday'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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