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ISEQ rises sharply at the close

Tuesday, October 30 17:35:19

The ISEQ rose steadily all day and closed sharply higher as hopes that Ireland can get a deal on legacy bank debt rose following the visit here of Germany's finance minister.

The index was up 36.84 points to 3,264.07..

The work of securing Ireland's future fiscal sustainability continued yesterday, as Minister for Finance, Michael Noonan, and Minister for Public Expenditure, Brendan Howlin, met in Dublin with their German counterpart, Wolfgang Schauble. A 40-minute meeting was followed by press questions in which Schauble declared himself "100 per cent" confident that Ireland would not require a second bailout. The matter of Ireland's bank legacy debt brought a more nuanced response with the German finance minister referring back to the "special case" statement a week ago by Taoiseach Enda Kenny and Chancellor Angela Merkel as the German position, rather than reiterate his own comments in recent times ruling out any retrospective recapitalisations by the ESM. Both Schauble and Noonan did agree that any action on Ireland's bank debt will have to wait until mid-2013 when the pan-European bank regulation infrastructure will be in place. A quite vague communique followed the meeting with very little detail except an outline of the topics discussed, but it does now appear that Schauble has softened his stance towards bank recapitalisations somewhat.

Ryanair will report Q2 results on November 5th. Q2, the July-September summer period, is the key quarter for profitability in the year for Ryanair. Davy assumes net income of E443.7m, c.10pc ahead of last year, on revenues of E1,733.3m (+11.3pc year-on-year). This implies a profit of E542.5m for H1 (consensus: E564m) with Ryanair producing a similar H1 profit to last year, making up the entire Q1 shortfall. The key variable is yields. "We assume yields of 4.5pc (company guidance: 4-7pc). In our model, yields at the top end (+7pc) would imply net income of E475m in Q2. Other components of the Q2 forecasts are an increase in fuel costs (we assume another E100m or 13pc unit fuel growth), ex-fuel costs up 0.9pc and ancillary growth per passenger of 1pc. Traffic growth in the quarter has been 8.5pc, with loads of 86.7pc, down 1 percentage point. Commentary from peers, including easyJet and even the tour operators, points to strong late bookings and would imply strong late summer sales," said analyst, Stephen Furlong. Shares in the airline rose 2c to E4.50.

Shares in Aer Lingus rose 2c to E1.05 as unions threatened industrial action in a row over pensions.