PRODUCT PROFILE

Latest Dublin Prices

ISEQ steady-Troika not happy

Monday, October 15 08:58:19

The ISEQ is steady this morning at 3,243, up 2 points on last week's close. News of China's relatively low inflation data points toward a possible further stimulus to the domestic economy. Stock indices fell on Friday. The Euro Stoxx 50 Pr fell 0.7pc while the S&P500 closed down 0.3pc. The falls came despite a sharp rise in the Michigan measure of US consumer confidence to 83.1 in October, its highest level in five years.

The key data release today is US retail sales in September. The market expects a 0.8pc rise on the month, following a 0.9pc rise in August. Retail sales have performed well in Q3, following a weak Q2, and despite modest employment growth. The market expects that trend to continue in September, but any shortfall in sales could re-ignite fears that a weak labour market will hold back the US consumer.

Media reports over the weekend suggested that the Irish government may seek to extend the period over which it implements expenditure cuts and tax increases to close the deficit. The apparent impetus is recent IMF analysis in the October World Economic Outlook suggesting that the negative impact of fiscal consolidation on growth may have been larger than originally expected. However, the context is spending overruns through 2012, and with a E3.5bn adjustment to implement in Budget 2013, as the government struggles to achieve cuts in the public sector pay bill.

Hence, it seems unlikely that the Troika will endorse a slower pace of fiscal consolidation, lest it relieve pressure on the government to achieve material cuts in expenditure. And Tanaiste Eamon Gilmore has indicated the Government will not seek to extend the period over which it reduces the deficit to 3pc according to Davy Stockbrokers.