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ISEQ slips ahead of crucial EU Summit

Thursday, October 18 12:55:11

The ISEQ fell back in to the red today ahead of a summit of EU leaders that could prove crucial to Ireland's chances of getting a deal on our bank debts.

By 12:45, the index was down 8.23 points to 3,264.93.

Ahead of tonight's meeting the Taoiseach said that he believed that the issues of individual countries should not be used as a reason for delaying measures to agree a bank deal, Taoiseach Enda Kenny told a meeting of European politicians today. While Mr Kenny did not name particular countries, his comments follow reservations expressed by the finance ministers of Germany, Finland and Holland on a deal. Mr Kenny repeated his call for the agreement of the 27 EU leaders on 29 June to be "carried through".

Meanwhile, the NTMA has successfully sold E500m in T-Bills with a coupon of 0.7pc. Owen Callan Senior Dealer at Danske Markets said today's issuance brings to E14.34 billion total issuance from the NTMA this year and provides the Agency with an enormous cash buffer of approximately E25 billion, when coupled its commercial paper programme. "This effectively prefunds most of the January 2014 bond redemption - which had previously been considered a huge hurdle for Ireland to overcome."

"The bulk of today's buying was from international, mainly continental European investors - this will certainly be seen as a welcome boost in the context of Ireland's position at the EU summit today, and will further highlight our progress particularly when compared with periphery Member States," he said.

Shares in CRH rose 14c to E14.29.

CRH will issue a third-quarter trading update on November 13th. This will be followed by capital markets days in London (November 16th) and New York (November 19th). Davy said it does not expect any major surprises from the trading update. Market conditions remain difficult in Europe, while the pace of growth continues to moderate in North America. Much speculation surrounds the capital markets day and the potential cost programme to be revealed. "We expect cost savings of circa E150-250m to be announced with the majority of savings aimed at the group's European businesses. Since 2007, the group has delivered circa E2.15bn in cost savings. Net of restructuring costs (circa E480m, all taken above the line), these measures have produced circa E1.67bn in savings. November's announcement will likely focus on the Europe Materials and Europe Products divisions. We estimate that to return these units to historic margins could require cost reductions of circa E240m (assuming a modest recovery in demand)," said Davy analyst, Robert Gardiner. "We expect this estimate to be at the top end of a range of E150-250m to be announced. Recent cost restructuring has proved expensive and further charges of 40-50pc of gross savings are likely. A target of E240m could lower our FY2013 EPS by 11-15pc due to once-off restructuring charges. However, the impact of new savings on FY2014 could see EPS bounce back to circa 117c. The group has actively managed its portfolio of businesses on an ongoing basis so we do not envisage any major announcements regarding the divestment of units or strategic reviews."

Shares in IFG rose 5c to E1.43. UK specialist pensions provider, Mattioli Woods (MW), has issued a brief AGM statement focusing primarily on the Retail Distribution Review (RDR). According to the statement, the RDR, which the Financial Services Authority has scheduled for January 1st 2013, will bring major structural changes to the sector "creating enormous opportunity for forward-thinking organisations". The group acknowledges that there are uncertainties in the short term as it transitions its revenue base from provider commissions to adviser charging but reckons that with the launch of its discretionary portfolio management service in August, it is "better-positioned than ever to compete in the post-RDR world".