Good Afternoon ,
The Geithner plan certainly ignited the markets yesterday evening and led to a brighter and more enthusiastic opening across Europe. Corporate newsflow was thin on the ground and while the markets reacted positively at the opening it was clear quite early on that the rally was unlikely to be sustained for the day and at around 10am the markets all retraced to yesterdays closing levels and indeed range traded below yesterdays closes for the most of the rest of the day. Europe was relatively the strongest place though Ireland , The UK and the US all stayed below yesterdays closing levels.
The initial enthusiasm of several large asset managers to be involved yesterday helped drive the market's positive reception. But the plan assumes, like its predecessors, that the basic problem is one of liquidity. It aims to put a price on securities that are not trading. If the problem is really one of solvency - that current prices for these assets are accurate - the gains will not be durable.
The news today in Ireland was about the successful Irish Government bond auction and the news that the EU commission was extending the deadline to bring the budget deficit into line to 2013 due to the scale of the problem. The actual statement from the commission read as follows :
While general government debt in Ireland stood at 40.6% of GDP in 2008, below the 60% reference value, the general government deficit is set to have reached 6.3% of GDP. According to the Commission's January forecasts, the deficit is expected to widen further to 11% in 2009 and to 13% of GDP in 2010 on a no-policy-change basis. The Commission, therefore, recommends to the Council to decide on the existence of an excessive deficit in Ireland and to make recommendations with a view to bringing this situation to an end. In view of the very weak economic situation in Ireland and the size of the deficit, a multi-annual deadline for the correction of the excessive deficit appears warranted. The Commission recommends to the Council that the Irish authorities take measures to achieve the 2009 deficit target. Thereafter, additional annual efforts going beyond those foreseen in the January 2009 Stability Programme addendum might be necessary to bring the deficit below the 3% of GDP reference value by 2013, if downside risks to the budgetary targets were to materialize. The strategy's credibility hinges on the timely specification of the consolidation measures to achieve this consolidation path. Given the scale of the required adjustment, a broad-based consolidation effort will be necessary, addressing both the expenditure and the revenue side of the budget. In order to further enhance the credibility of the medium-term consolidation strategy, it will also be crucial to strengthen the Irish medium-term budgetary framework.
The NTMA bind auction results were as follows : 4.0% Treasury Bond 2011: €300m at a weighted average price of 101.319, yield of 3.459%. Bid to cover ratio of 3.8. 4.5% Treasury Bond 2020: €700m at a weighted average price of 89.536, yield of 5.808%. Bid to cover ratio of 2.7. The spread between Irish and German 10-year debt narrowed 24 basis points today to 249 basis points. The average spread during the past 10 years between Irish and German 10-year debt was 18 basis points.
AIB has today announced a new post, upcoming changes to its board and a shake-up of management.Donal Forde, currently managing director, AIB Bank Republic of Ireland, has been appointed to the role of Director of Group Strategy, a new post. Robbie Henneberry, currently managing director AIB Bank Great Britain and Northern Ireland, has been appointed managing director of AIB Bank in the Republic of Ireland. Meanwhile, AIB's Board also announced today that Mr Forde has decided not to seek re-election at the forthcoming AGM on May 13. Michael J Sullivan, independent director, will retire after the AGM.
Ryanair were in the news as Michael O’Leary spoke to the media at a route launch in Madrid where he said that if anything Ryanair would be upgrading their forecasts for passenger numbers through March 2010 and said that the recession is prompting a shift to budget travel. Ryanair also said that their projections wont be impacted by the recent rise in the price of oil.
Not surprising that the market has given up some ground this afternoon , however the US looks like it is going to have another attempt to get the rally going , this would be a very positive sign that the market in the US seems determined to see this plan as good news .
Have a good evening
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
www.merrion-capital.com
Disclaimer www.merrion-capital.com/disclaimer.html
Merrion Stockbrokers Limited (registration no. 307878)
is a limited liability company whose registered office is at
Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.
No comments:
Post a Comment