Liams Last Post : Govt announce 15bn 'adjustment', CEMEX pricing pressure continues

Good Afternoon ,

 

And first the Bad news….For some time the Irish Government has made clear that the target is to reduce the deficit to 3% of GDP by the year 2014, this afternoon the Government has revealed that the adjustment involved will be €15 billion. The Government statement went on to say that the key reasons for the significant increase from the figure announced in Budget 2010 are lower growth prospects both at home and abroad and higher debt interest costs. The purpose of the Four Year Plan for Budgets and Economic Growth is to chart a credible way forward for this country. The size of the adjustment for 2011 and the distribution over the remaining years will be announced in the Four Year Plan. The Plan will contain targets for growth and strategies for the achievement of those targets. The Government realises that the expenditure adjustments and revenue raising measures that must now be introduced will have an impact on the living standards of citizens. But it is neither credible nor realistic to delay these measures. To do so would further undermine confidence in our ability to meet our obligations and responsibilities and delay a return to sustainable growth and full employment in our economy…. And so the population awaits with bated breath to hear how the 'adjustment' actually be implemented.

This news coupled with the news of NAMA making such a huge percentage profit on one of its loans makes for an interesting counterpoint. Even  if NAMA made some profit over time then the taxpayer would be happy. Whether the taxpayer is being taken for a complete ride at this point is another question though for the crucial point is that each Euro that NAMA underpays for Assets is a Euro that goes straight into the sums that make up this eur15bn adjustment.

There wa little consequential corporate news again in Ireland though CEMEX Q3 results provided sober reading in the light of the comments and trends that CRH pointed to at the time of their last profit warning. CEMEX have their own issues which include a requirement to issue equity to curb a sharp escalation in their fuinancing costs but the read across for CRH was bearish . Q3 showed sequential quarterly basis Cement and Ready mix volumes in the USA were down , Aggregates volumes were up but pricing in all sectors was lower. In Europe Cement , Ready mix and Aggregates volumes were up but prices were down.Still CEMEX suggested that Q4 would mark the inflection point in earnings across al their geographies. This has to be seen to be believed as the pressure clearly continues. So no trigger for a change of heart to a more positive tack for dear old CRH yet. We keep waiting…

.UK GDP figures were released this morning which showed Q3 grew by 0.8% with UK construction rising by 0.4% which was somewhat re-assuring for the construction related stocks such as Grafton and Kingspan. The market took the positive surprise negatively though as it suggests that a further round of Quantitative Easing is likely to be postponed for the time being.

The US Case Schiller House price index showed house process continuing to drop by -0.2% in August.

And in the USA history was made with a negative Yield auction for inflation bonds for the first time ever. The Treasury Department auctioned off 5-year Treasury Inflation Protected Securities, or TIPS, at a negative 0.55% yield on Monday. That marked the first time ever that those bonds were auctioned at a yield below zero. Demand for those Treasuries means bond traders are banking on the Federal Reserve's success at boosting inflation over the next five years. The Fed has said it plans to implement another round of quantitative easing.

Sloppy market ,

Have a good evening

Liam

 

Quiet drifty day ,

 

 

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

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