Liams Last Post : Markets waiting for bailout news , Kingspan marginally disappoints , Portugal joins in.

Good Afternoon ,

 

Markets are quiet today worrying about what to make of the Will they or wont they issue re Ireland. Yes there is no denying that talks are ongoing but the Irish government seems to be keen on any bailout going directly to the banks and not the state.  The other big issue for Ireland will be not ceding control over the 12.5% corporation tax rate. A decision that Ollie Rehn seems to keep re-iterating over and over again.  

 

The 10 year bond yield has continued its descent now down to 7.95 and a mere 540bp over Germany. It would appear that Ireland is now under pressure to accept a bailout.

 

Portugal too is under pressure from markets and the finance Minister made some remarkable comments today. "The risk is high because we are not facing only a national or country problem. It is the problems of Greece, Portugal and Ireland. This is not a problem of only this country."  "This has to do with the eurozone and the stability of the eurozone, and that is why contagion in this framework is more likely. It is not because markets consider we have similar situations. They are only similar in what concerns markets, but as I said they are very different. Markets look at these economies together because we are all in this together in the eurozone, but probably they could look different if we were not in the eurozone. Suppose we were not in the eurozone, the risk of the contagion could be lower."

 

But as Brian Cowen was incensed with the comments mad by Angela Merkel which ultimately ended up with the G5 statement on Friday then Portugal too threw some blame in the direction of Angela Merkel too.

 

He went on to say that the Portugese budget proposals were positively received by the markets, then things were reversed because of the uncertainty around the permanent mechanism for dealing with bail-outs," referring to the European summit on October 29, when plans for a rescue mechanism to succeed the existing European Financial Stability Facility were outlined in a Franco-German initiative.

The Corporate news was from Kingspan today who released an IMS covering July through to the end of September. Sales in Q3 increased by 15%, helped by a previously flagged strong Q2 order book. Kingspan's order run rate has slowed from the strong performance of Q2. The company has also seen resistance in their ability to pass through increases in steel and chemical prices to customers since the company reported its H1 numbers. This pressure on margins is likely to continue in to the future given "macro weakness" which will also affect volume levels. Kingspan saw net debt increase to €140m from €135.1m . Kingspan now expects a full year operating profit in the range of €62m-€65m which is slightly below our estimates of a €65.9m.  The IMS was a tad disappointing with consensus earnings likely to be revised down a little across a range of brokers. The overall valuation looking ahead to 2011 is not cheap either and as the multiple is anticipating a recovery the stock is likely to struggle here. Kingspan dropped -1.2% today.

 

Business conditions in the New York area deteriorated in November, as the New York Fed's Empire State manufacturing survey plummeted 27 points to -11.1, driven by a sharp drop in new orders. The release was far worse than economist expectations for a +15 reading and marks the first negative reading since July 2009. The shipments index also fell below zero.

 

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.