Liams Last Post : ECB bond buying forces short squeeze in Irish Bonds , US employment numbers disappoint , ICG sells Pride of Bilbao.

Good Afternoon ,

 

Markets opened higher this morning after the third straight triple digit gain day in the USA .European markets had rallied into the close yesterday on the back of strong buying of peripheral bonds by the ECB in decent sized euir100m tranches for the first time and four times bigger than previous forays into he market. This effectively triggered a short squeeze and the consequent rally which strengthened the Euro also. There was no big bang announcement from the ECB but they did put their money where their mouth was. As one commentator put it Jean Claude Trichet has finally learned the Bernanke's lesson on Central Banking: when all else fails, buy it all…

 

The rally in Spain and Portugal and for that matter Irish bonds was quick as the market had gotten quite oversold over the past couple of weeks and there was little resistance to the rally. My trip to London earlier on the week had affirmed that the consensus trade is short spain and so it was easy to trigger the pullback. What remains to be seen however is if this pullback is anything more than a technical retracement to previous support levels.

 

Irish Bonds quietly slipped under the 9% level and moved quickly to give up nearly 100bp of yield , A massive rally in the underlying price of Irish Sovereign paper. Spanish paper remained stubbornly above the 5% levels for 10 year paper.

The macro themes continue to dominate as the reporting season is very quiet now and from an Irish perspective we were scraping the bottom of the barrel looking at UK housebuilder Berkeley results to have anything to say this morning. Hard to get a real feel for the relevance of Berkeley to Grafton or Abbey. Berkeley specialises in the south of England ,and announced an 18.5% rise in half year profits to £61.6m. Managing director Rob Perrins said: Today's results, which show an increase in both earnings and sales reservations approaching 20%, demonstrate the underlying resilience of the housing market in London and the south east over the last six months. Overall this strong performance provides the board with confidence that Berkeley can outperform management's original expectations for the current year and is well placed for the following year.

ICG announced the sale of the Pride of Bilbao today. This had been on the cards for quite some time though the ICG management team had tried to steer the market to believe that this might just be re-chartered.  The total consideration for the sale is €37.7 million, payable in instalments over 5.75 years, up to September 2016. (The transaction is in the form of a bareboat /hire purchase agreement under which the vessel is chartered by ICG to St Peter Line and on payment of the final hire payment in September 2016, title passes to the charterers). Delivery is expected to take place in December 2010.  The transaction effectively brings ICG into a net cash position and the underlying conundrum posed some time ago by Eamon Rothwell the CEO remains to be resolved. This is a company now in a net cash position where the shareholders are geared so it probably moves the final solution to the corporate ownership or future of this one a step closer.

 

The Irish Market peaked at about 10am this morning and then fell like a stone dragged lower by CRH and Ryanair .

 

At 13:30 the US Nonfarm payroll data sparked a reversal in the markets with the all European markets dipping.. The U.S. economy added fewer jobs than expected in November and the unemployment rate rose to its highest level since April, underlining the continued weakness in the labour market 17 months into the recovery. Nonfarm payrolls rose by 39,000 last month as private-sector employers added only 50,000 jobs, the Labor Department said Friday. The October number was revised up slightly to show a 172,000 increase from a previous estimate of 151,000. The unemployment rate unexpectedly rose to 9.8% last month. The bad news within the numbers also contained news that Hourly earnings remained flat vs expectations of 0.2% increase.

 

New orders received by U.S. factories dropped 0.9 percent to a seasonally adjusted $420 billion in October, The Commerce Department said October's decline followed an upwardly revised 3 percent gain in September orders while August orders were flat. Economists surveyed by Reuters had predicted a slightly steeper 1 percent fall in October orders.

This afternoon Moody's continued their slow but steady demolition of Ireland saying that  the only six TRIPLE-A rated Irish bonds may be downgraded because they are backed by large numbers of Irish home loans. Credit ratings agency Moodys is considering the downgrade for the bonds from 'AAA' status, saying that the rating is unrealistic. If the bonds are downgraded, it essentially means that loans will be more difficult to secure. Subordinated bonds for Bank of Ireland, AIB and Irish Life & Permanent are also under review by Moody's with a view to being downgraded.

Moody's also warned that  that the severity of the recession here "will leave a lasting legacy on the performance of Irish residential mortgage loans". The agency has constructed a profile of the typical person most at risk of defaulting on their mortgage. They are more likely to be self-employed, have bought in 2006 or 2007, and not live in Dublin or Cork.

The good Old Oirish yes OIRISH Government confirmed that the provisional calendar for the houses scheduled the Christmas break to start on Thursday December 16, with TDs and Senators returning to duty on Wednesday January 19 – 35 days later.  So no rush to have that election then…a well earned rest after al the stress ….

Watch this for a laugh…or a cry… 

http://www.youtube.com/watch?v=nD2Vr7lb-D4&feature=player_embedded

Have a good whiteout weekend !

 

And I will leave you with this thought…..

  A driver is stuck in a major traffic jam just outside Dublin on the M50 motorway.
Nothing is moving.  Suddenly a Garda knocks on the window. The driver rolls down his window and asks, "What's going on?"
"Pensioners" have kidnapped Brian Cowen, Brian Lenihan & Mary Harney, and a bunch of Bankers.
They're asking for a €30 million ransom, otherwise they're going to douse them with petrol and set them on fire.
We're going from car to car taking up a collection."
The driver asks, "How much is everyone giving, on average?"
"About a litre."

 

http://www.bbc.co.uk/news/uk-scotland-11901718     nice sat photo of UK and Ireland this morning…

Liam

 

 

 

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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