Liams Last Post : Recession bites at Aer Lingus traffic ,Bank of Ireland mulls debt for euity swap , Europe profit takes and US resilient.

Good Afternoon,

 

The markets started this week in a definitely more sombre tone giving up roughly -1.5% across the board. The Europstoxx50 index fell -1.7% , the swiss market fell -0.8%. Ireland was broadly flat on the day.

 

Bank of Ireland announced the closure of the deal with State Street and therefore complies now with the requirements under the EU re-structuring. Bank of Ireland also is linked to a debt for equity swap with some junior bond holders. Bank Of Ireland may raise an additional eur200m of capital through this mechanism. Bank of Ireland closed the day down -5% having opened the days trading +4% on the back of a story in the weekend press suggesting that it is in talks with Middle Eastern Sovereign wealth funds re potential fresh equity raising.

 

Aer Lingus traffic stats highlighted just how hard the recession is biting with a -27% decline in December year on year booked traffic. The weather in December added to their problems as the airline said it had actually carried 8% less than the number of passengers booked because of the snow across Europe. Aer Lingus Management had actively managed the load factors in anticipation of the more difficult environment but the headline decline in absolute traffic was eye catching.

 

CRH closed today up +1.3% as the market shrugged off the news that re the Republicans moving to control the Federal Highway Fund expenditure. The sector in the US is under pressure , the valuation of CRH does not look cheap so the market must be assuming some major rebound in earnings that just right now we cannot forsee ourselves being taken by surprise on the upside.

  

DCC was the subject of a very negative article in the Sunday times concerning the activities of a Fuel price comparison website owned by them called Boiler Juice. The article suggests that the website made price comparisons favouring the DCC owned Southern Counties Fuel at the expense of its competitors without mentioning that the Site and Southern counties were both owned by DCC.  DCC is one of my favourite stocks and I have been a big fan of it as it grows its UK Energy distribution business.  I will be watching this story intently from herein the hope that nothing comes up to undermine my confidence in DCC management from here.

 

The low fares airlines stocks had been performing well but against a weak market background these stocks all gave up some ground today with Easyjet which had been the best performer also dropping back by -2.5% .

 

On the Macro side , the markets are wondering about Portugal , Spain and Italy as bond yields continue to rise.  It seems like a racing certainty that Portugal will too find itself ask for a bailout. It makes no sense that Portugal will go to bond markets to issue debt at yields over 7% when Ireland has been bailed out at 5.51%...

 

Tullow oil started the drilling news releases for the year , the news re Tweneboa offshore Ghana was supportive and the stock added +1.4% The other stocks I like namely Petroneft ,Petroceltic and Cove all continue to trade in a range. Newsflow wil be the key for this group, I expect a busy year.

 

In the USA the markets remain remarkably resilient  as the fourth Quarter earnings season is about to commence.

 

Have a good evening.

 

Liam

 

  

 

___________________________________________

Liam Boggan

　

Merrion Stockbrokers

Tel.: 353-1-2404171

Mob:353-87-2313505

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