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ISEQ slips lower in thin trading

Wednesday, January 23 17:32:17

The ISEQ continued with the pattern of narrow band trading today with development in the Irish debt negotiations having little impact on equities.

By 12:30, the index was down 8.32 points to 3,481.77.

Michael Noonan has indicated that the decision by EU leaders to consider extending Ireland's bailout loans will not be a game-changer for Ireland's debt sustainability. However, with EU leaders extending loans, the IMF might well follow, Davy's Conall Mac Coille said. "The immediate funding requirements to meet EU/IMF maturities are considerably larger than the promissory notes arrangement of E3.1bn per annum. Maturing EU/IMF funds are currently E6.9bn in 2015, E6.1bn in 2016, E3.2bn in 2017 and E7.1bn in 2018. Furthermore, the interest rate on the promissory notes is effectively set at the ECB rate, representing the most cheaply funded part of Ireland's general government debt. Any benefit from a deal on promissory notes will come from extending maturities, rather than reducing rock-bottom funding costs. So, in both reducing funding costs and extending maturities, the decision to consider extending the term of EU funding support could be more promising than any likely deal on the promissory notes. However, neither measure will reduce the level of Ireland's gross debt, with both the government and the IMF seeming to now place more emphasis on securing ESM capital injections into Ireland's banks."

Shares in CRH fell 19c to E15.15. The latest US Architectural Billings Index (a 9-12 month leading indicator for non-residential activity) has come in at 52.0 for December. While down from 53.2 in November it represents the fifth consecutive month that it is above the critical 50 level, Goodbody noted. "Our forecasts factor in mid-single digit growth for non-residential construction activity with Wolseley's US operations having the biggest exposure at 44pc versus 30pc for CRH," the broker said.

Kingspan's stocks fell 3c to E8.82. Severfield-Rowen has issued a profit warning this morning reflecting a difficult backdrop in the UK with pricing pressures and protraction of contractual settlements. It has also seen significant cost overruns on one of its contracts. As a result the Board is reviewing the current contract base and will inform the market as soon as possible of the financial impact. In addition the Board has removed the CEO. "While the UK non-residential market remains challenging we see limited read through from the Severfield-Rowen statement for Kingspan and it is on track to deliver on the profit guidance for FY12 of E105m (+10pc yoy). In addition, further progress in 2013 is underpinned by the integration benefits from ThyssenKrupp Construction Group," said Goodbodys.