Good Afternoon ,
Well hard to believe that today is a follow on from yesterday. Suddenly all is good with the world again and the market nerves are done with ? Hardly likely but the pulback to retest the support levels was dramatic in its rapidity yesterday and similarly the rebound today has been in some cases breath taking.
The Banks in Ireland were up sharply today after comments by the Minister for Finance that the NAMA remains on track. Irish Life reacted positively today as well climbing +6.3% but still well off the highs of the week as the market digested the story that the EBS and Irish Nationwide are considering a merger that excludes the Permanent TSB.
Incrementally negative news and leaves questions about what they do now by way of plan B to relieve the Funding gap ? Maybe good news though that Irish Life is not dependent on MAMA and can immediately plan and execute its own strategy free of constraints of a Government shareholding.
Grafton rebounded sharply after the sell off to close +8.8% at the 3.46 level and it was totally friendless yesterday.
Ryanair is struggling ahead of the results on Monday and has dipped below the Eur2.99 level , I have to say that I feel that at these levels , that the stock is looking interesting at these levels , I had thought some months ago that there might be a chance that it might dip down but it looked unlikely until the past few days. I dont think there will be upside surprise in the numbers but I do think that the stock is increasingly being seen as having defensive qualities despite the environment. We wait and see.
In terms of our expectations , we anticipate that earnings will rebound strongly on lower fuel, with EPS forecast at 19.7c. Focus will be on yield performance and any update to full-year yield guidance. We expect -21% for Q2 and the full year (-27% in H2), in line with company guidance. Despite the recovery in Q2 profitability, the main focus will be on how tough the outlook is for H2 yields and on uncertainty over fuel cost trends for next year. Our conservative yield assumption for H2 reflects the likelihood that the requirement for promotional fares to stimulate a cautious consumer to fly will be even more intense in the seasonally weaker half, where travel decisions are often more discretionary. Weaker sterling will also be a negative compared to H1, but less of a factor yoy. Consequently, we do not expect yield trends to ease in H2, and if they don't consensus estimates for the full year will be vulnerable to downward revision. With the Q2 results, we will be particularly interested in an update on (i) any change in full-year yield guidance; (ii) what the run rate in yield decline is for the seasonally busier Q2, particularly the exit rate in September; and (iii) whether management continues to expect a weaker H2. We Reiterate HOLD recommendation on Ryanair.
Smurfit Kappa recovered half of its losses of yesterday and climber back +7% at the close.
The next few days are critical , the economic news today showing that the USA has emerged from technical recession with a+3.5% growth in annualised Quarterly GDP was very positively received but I get the feeling that after a tough few days , the market is happy to have a relief rally. We all knew that Q3 was stronger. We have had the Q3 earnings season in the USA, the issue is Q4 and whether there is a carry through in terms of underlying consumer demand...there is frankly little eveidence for this yet . I hope that we do see the pickup and avoid a double dip but todays rally did not recoup yesterdays lost ground in Ireland which highlights that this particular market is still very fragile.
I am still not convinced that todays rally means an end to the recent volatility , there are stocks which had tested the bottom of their trading ranges , rebonded somewhat today but it they ned to form a base here to push on again.
Good it rallied , now need the consolidation phase to end and maybe from these new lower levels we can build a sustained rally.
So the day ends in Europe with much relief all around but the Month to date performacne stills shows a -8% decline in European IT stocks , -6% in Financials , -4.5% in Utilities with Industrials , COnsumer discretionary andMaterials all down between -2.5% and -5%. The best performing sectors are Energy +3% and Consumer staples +2.5%
Lets see if wall street holds the gains on the day , it has been a rather V shaped last two days and tomorrow , the close of the month will be critical.
Have a good evening.
Liam
___________________________________________
Liam Boggan
Merrion Stockbrokers
Tel.: 353-1-2404171
Mob:353-87-2313505
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