Liams Last Post : Ireland gets praised ... markets find support inthe afternoon, Ryanair raises guidance.

Good Afternoon ,

Markets resumed the slippery slope only to recover from midday after a relatively strong day yesterday during the bank holiday when both the USA and UK markets were closed.

Ireland came in for positve comment today from FOUR directions .

1 ) Central bank Chairman Patrick Honahan gave a positive assessment of the prospects for Ireland in an interview with Bloomberg where he said that the Central Bank are looking for growth in the second half of the year.  

2) The OECD has joined in the group forecasting a return to growth of Irish exports in the second half of the year.

3) Ernst and Young Economic Eye summer forecast published today today pointed to a jobless recovery underway. Their forecasts forecasts that the Republic of Ireland (ROI) will endure a further 1.0% contraction in GDP in 2010 (although on a quarterly basis, the economy is predicted to start growing again in the first quarter of 2010), before positive annual growth of 2.8% in 2011. Ireland is the leader in the Eurozone league in terms of the size of its fiscal deficit in 2009 (at -14% GDP based on the Eurostat fiscal definition), but according to E&Y is top of the Eurozone league for graduate skills in the 25-34 age group, has the fastest rate of price correction (CPI index down 4.5% in 2009) boosting cost competitiveness, and is second in export orientation at 87% (behind Luxembourg and joint with Malta).  E&Y say it is the low corporation tax and early and decisive fiscal action taken by the Government, that lie behind the more optimistic medium-term outlook for the ROI economy.  However, the need to control and repay debt will be crucial to ensuring this forecast will become a reality. "

4) The Wall Street Journal Europe OPINION also ran an opinion piece today highlighting and praising Ireland for the austerity measures and quick and painful action taken at the time.

So all the praise yet still in the danger zone … And no one is yet making anything about the prospective significant stimulus to Irish corporate earnings arising from the translation of Strong Sterling and Dollar earnings to Euro not to mention the increased competitiveness of Ireland post the wage cuts and the impact of the Euro weakness.

European market problems continued with Fitch following on from its sovereign rating cut for Spain from AAA to AA+ last Friday , moved to cut the ratings of a number of large spanish banks including Sabadell (A from A+ and issuer rating to B/C from B) and Banco de Valencia (BBB from BBB+) . Some Spanish Savins Banks were also cut too,

On Sabadell Fitch Commented The rating actions reflect the deterioration in its asset quality indicators mainly due to the bank's real estate development sector exposure and single-name concentration, and Spain's weak economic environment and prospects. Fitch expects that 2010 and 2011 will remain challenging for the bank as Sabadell's performance is highly correlated with the Spanish economy, which has suffered from a sharp downturn in the property sector

The slashing of recommendations and questions over the very survival of BP also weighed heavily on markets today.

The currency markets also reflected the continuing contagion fears about sovereign debt and the ECB warning about more loan losses for Banks also weighed on markets with the dollar touching below 1.22 at one stage.

In Ireland the Financials bore the brunt of the uncertainty though they recovered a tad during the afternoon with Irish Life down -5.2% at 1.85 , Bank of Ireland nil paid rights dipped down and rallied as the afternoon progressed with wall street providing a much needed bit of support this time to fragile european nerves.

CRH also recovered early nerves to rally +2.7% , though Grafton and Kingspan remained depressed -5% in the case of Grafton and -3.6% for Kingspan.

Ryanair results brought about two conference calls of predictable O'Leary ranting about everything and everyone .The good news was the raised guidance and the announcement of the special dividend which had been talked about for some time. Ryanair stock was up +4.7% at 3.54 . Ryanir have now raised their earnings guidance into line with market expectations…no doubt market expectations will move on from here.  

And to confound the double dip bears Smurfit remained resilient at the 6.30 level.

It is like a see saw …

Have a good evening…

Liam

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

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