News Archives - Page 3 of 268 - Luke O'Malley & Co

Trade war escalation puts Europe’s shaky economy back on alert

Trade war escalation puts Europe’s shaky economy back on alert

The US and China are taking another swing at global sentiment, which is bad news for Europe as the economy starts to find its feet after a torrid year. In a week that was supposed to bring progress in trade talks, President Donald Trump boosted tariffs on $200bn of goods and threatened more. China said it will be forced to retaliate, though it hasn’t yet given details.

The escalation will have a global impact, but for the euro area it brings to life one of the “pronounced” risks highlighted this week by the European Commission in its latest (gloomy) economic assessment. The region is also facing its own US deadline: Trump is due to decide by May 18 whether to slap levies on car imports, though the date could be extended. “We’re at a very fragile position in the global economy; we’re seeing an industrial recession in most parts of the world,” said Zurich strategist Guy Miller.

“The uncertainty this creates means the global trade situation, which is already fragile, is going to be very vulnerable.”

The US-China setback follows figures suggesting the euro-area economy was starting to stabilise. First-quarter growth was better than anticipated and surveys of activity bottomed out after tumbling through 2018. In Germany, industrial production and orders grew in March.

But confidence remains fragile, with a commission measure for the eurozone at the weakest in more than two years. “A quarter of our members have exports to the US that were already affected by these ridiculous tariffs,” said EU Chamber of Commerce in China president Mats Harborn. Increasing tariffs to 25pc “will prove extremely damaging to those companies, and the collateral damage will ripple around the globe”.

The latest tit-for-tat is likely to worry EU leaders. They agreed on a trade pact with Trump last year and are working to prevent more tariffs on EU products.

Moreover, Europe’s worries could be moot: The US-China talks may ultimately succeed. A deal would help support the view of a better second half for the euro-area economy. Failure, though, “would mean persistent (trade) uncertainty and flat-lining growth rather than a return above potential next year,” Bank of America Merrill Lynch analysts said in a note.

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Construction activity growth quickens in April despite Brexit concerns

Construction activity growth quickens in April despite Brexit concerns

Construction activity rose sharply last month with April marking the 68th consecutive month of stronger construction activity in Ireland.

The Ulster Bank Construction Purchasing Managers’ Index – which tracks changes in total construction activity – rose to 56.6 in April up from 55.9 in March.

Ulster Bank said that housing activity was the strongest performing sub-sector as growth in residential activity continues to show welcome signs of rapid expansion.

Commercial activity also increased last month, though at the slowest pace in six months. But for the eighth successive month, civil engineering activity declined, though at a weaker pace than in March.

The index shows that new orders continued to rise sharply amid reports from companies of improving demand conditions in April.

But some companies also cautioned that Brexit uncertainty was weighing negatively on customers.

Some firms also said they had raised their input purchases in order to mitigate any supply disruptions resulting from Brexit.

Ulster Bank said that in contrast to the faster rise in new business, employment growth in the Irish construction industry eased slightly during April.

Despite this, the rate of job creation was sharp and quicker than the long-run series average with companies indicating that extra staff had been hired in order to keep up with customer demand.

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Number of homes to rent ‘at lowest level since 2006’

Number of homes to rent ‘at lowest level since 2006’

The number of homes to rent has reached its lowest level since 2006.

According to the latest quarterly rental report from Daft.ie just 2,700 homes were available to rent nationwide on 1 May this year.

The shortage of supply has pushed up average rents across the country to €1,366 a month – up over 8% year-on-year.

While the increase in Dublin was less than 7%, in Cork, Galway, Limerick and Waterford rents increased by 10% to 15% over the last year.

Rents have increased by an average of 12% in Munster, Connacht and Ulster.

Average monthly rent in Dublin is at €2,002 and €968 in the rest of the country.

The average listed rent is now €337 higher per month than the previous peak in 2008 and almost €625 higher than the low seen in late 2011.

Responding to the report, the Simon communities said the figures highlight the inability of the private rental sector to provide adequate and secure housing for all.

The report’s author, Professor of Economics at Trinity College, Ronan Lyons, said the country needs more rental supply and rent pressure zones are not working because of that lack of supply..

Speaking on RTÉ’s Morning Ireland, Mr Lyons said: “The solution is a relatively straightforward one, at least to say, is that we need more rental supply. The challenge is of course doing it.”

He said the rent pressure zone legislation is supposed to cover both sitting tenants and new tenants.

But Mr Lyons said it is impossible for new tenants to police the landlord and know the 4% increase a previous tenant might have faced when they are entering a market with no supply.

“Rent pressure zones are not working for precisely the reason they were introduced, there’s a lack of supply.

“It’s a bit like, sort of, cutting off your thermometer to say that the temperature hasn’t gone up as much. Rents are the signal, not the problem. The problem is a lack of supply.”

According to the report, average rents across the country in the first quarter of the year with year-on-year change, are as follows:

Dublin: €2,002, up 6.8%

Cork: €1,331, up 10.0%

Galway: €1,260, up 11.4%

Limerick: €1,195, up 14.4%

Waterford: €986, up 13.6%

Rest of the country: €968, up 9.7%

Responding to the report, Threshold, the national housing charity, said rent increases shown in this latest report “reinforce our concern about the inadequacy of the Housing Assistance Payment as a means of supporting those seeking increasingly expensive and scarce rental accommodation”.

The Simon Communities of Ireland said that the figures highlight “the inability of the private rental sector, in its current form, to provide adequate and secure housing for all”.

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Revenue collected 26% more corporation tax last year

Revenue collected 26% more corporation tax last year

The amount of corporation tax collected by the state last year increased by 26% to €10.4 billion, according to the Revenue Commissioners’ annual report.

The increase was driven by higher payments from manufacturing companies and increased payments from big multinational companies.

The report also shows that the share of corporation tax paid by the top ten corporate taxpayers now accounts for 45% of all the corporation tax paid, up from 40% the year before.

Almost €1 in every €5 of tax collected by the Revenue Commissioners came from corporation tax last year – an extraordinarily high proportion by international standards.

The amount paid surged by 26%, underlining again the volatile nature of this tax head and how vulnerable the public finances have become to the risk of a sudden downturn in corporation tax payments.

There are 164,000 companies in Ireland, but just 100 of them pay almost three quarters of the corporation tax collected. Foreign owned companies paid 77% of last year’s corporation tax take.

In total, Revenue said it collected net Exchequer receipts of €54.6 billion for last year, up €4 billion on 2017.

There were increased receipts for almost all taxes and duties including Income Tax, up 6.6%, VAT up 7% and Corporation Tax.

Niall Cody, Revenue’s chairman, said that continued strong levels of timely, voluntary compliance rates of over 90% across all taxes confirm the reality that the vast majority of individuals and businesses pay the right amount of tax, on time.

Mr Cody acknowledged taxpayers’ engagement, and that of tax practitioners and agents, in achieving the very strong compliance rates seen again for 2018.

Today’s report also reveals that 400 additional customs officers have been hired of the estimated 600 required for Brexit duties.

Revenue said the delay to Brexit has enabled them to complete additional training, adding that as Customs and Revenue is an integrated service, staff can be redeployed from one are to another rapidly.

This means that in the event of a sudden Brexit, additional staff can be redeployed to cope.

The Commissioners appealed once again to firms that have not applied for an EORI number – which is free and facilitates customs declarations when trading with the UK after Brexit – to do so.

They warned that Brexit could happen suddenly before the 1 November deadline.

Revenue also said it it was “confident that our systems will successfully handle the increased transaction levels arising as a result of Brexit”.

Last year the authority processed 1.6 million customs declarations through their electronic systems.

It said it believes customs import and export declarations could rise to as many as 20 million a year after Brexit, due to the amount of trade the country has with the UK.

Looking ahead, Niall Cody said that it is very important that Revenue supports compliant taxpayers by identifying risks and tackling non-compliance in all its forms.

“We continue to be alert to, and pro-actively respond to, the risks arising from the changes in economic and business environments both nationally and globally,” he added.

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UK economy expands on Brexit stockpiling

UK economy expands on Brexit stockpiling

The UK economy grew by 0.5% in the first quarter, boosted by companies stockpiling ahead of Brexit, official data showed today.

British gross domestic product expansion outpaced the 0.2% seen in the final three months of 2018, the Office for National Statistics said in a statement.

The ONS added that UK manufacturing jumped 2.2% in the first quarter with recent surveys showing Brexit-facing companies building inventories, said to include key car parts and medicines.

The first-quarter growth figure was meanwhile in line with market expectations.

The strong manufacturing performance offset a slowdown in services output to 0.3%, the ONS data showed.

The Bank of England last week raised its forecast for UK economic growth this year, as stockpiling offsets lower business investment elsewhere ahead of Britain’s departure from the European Union.

UK economic activity was given a temporary boost as companies rushed to build up stocks of components and goods before the original March 29 Brexit deadline, the Bank of England said.

The Bank of England is predicting UK GDP expansion of 1.5% this year, up from its previous growth estimate of 1.2%.

Following today’s data, the pound was little changed as first-quarter output of 0.5% had been widely forecast following the recent BoE update, analysts said.

Britain is due to leave the EU by October 31 after two delays this year triggered by MPs rejecting a divorce deal Prime Minister Theresa May had struck with the bloc.

The Centre for Economics and Business Research said that businesses in the first quarter had purchased more goods to keep in storage in the event of a no-deal Brexit affecting supply chains and the ability for businesses to the buy goods they need for production.

The Bank of England, meanwhile, sees the boost to growth from stockpiling as only temporary, forecasting that UK GDP would slow to about 0.2% output in the second quarter of this year.

Many analysts agreed with Joshua Mahony, senior market analyst at IG trading group, who said that “while manufacturing is enjoying a bullish moment, there is a strong chance that such strength could be short-term given its reliance upon Brexit stockpiling”.

Reacting to the latest GDP data, British finance minister Philip Hammond described the UK economy as “robust”.

“The economy has grown for nine consecutive years, debt is falling, employment is at a record high and wages are rising at their fastest pace in over a decade,” the minister said.

The Treasury said that the UK economy was forecast to grow faster than Germany, Italy and Japan in 2019.

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Annual inflation hits seven-year high of 1.7% in April – CSO

Annual inflation hits seven-year high of 1.7% in April – CSO

Inflation hit a seven-year high of 1.7% in the year to April, new figures from the Central Statistices Office figures show.

Today’s CSO figures are a sign of significant consumer price growth in the country after four years as European Union’s best performing economy.

Consumer prices, which have been broadly flat since 2012, grew 1.7% year-on-year in April, up from 1.1% in March on the back of more expensive rents and mortgage interest repayments as well as higher prices for diesel and petrol.

Consumer prices on a monthly level rose by 0.4%, today’s CSO figures show.

The CSO said that Housing, Water, Electricity, Gas and Other Fuels costs rose by 4.7% due to higher rents and mortgage interest repayments as welll as an increase in the price of electricity, gas and home heating oil.

Prices in restaurants and hotels increased by 3.7% in the year to April, while alcohol and tobacco prices increased by 2.4%.

Transport costs also rose by 3.7% last month, mainly due to an increase in air fares and higher prices for diesel, petrol and motor cars.

However, April also saw lower motor insurance premiums and a reduction in prices for appliances, articles and products for personal care and other personal effects, as well as cheaper furniture and furnishings, the CSO added.

While the increase was probably exaggerated by Easter, Ireland appears to be moving into a slightly higher inflation environment, commentedd Austin Hughes, Chief Economist at KBC Bank Ireland.

“By and large it is healthy because the two elements that are driving it are the strength of domestic demand and the fact we are not seeing a collapse in sterling,” he said.

“There is a little less pessimism about the UK economy and that also is a positive for the Irish economy,” the economist added.

The average annual inflation rate for 2018 was 0.5%, up from 0.4% in 2017 and no change in 2016, according to CSO data.

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Irish savers still earn the lowest return on their deposits across the Euro zone

Irish savers still earn the lowest return on their deposits across the Euro zone

Saver with €10,000 earns average of just €3 in Ireland – compared with €122 in the Netherlands

It’s not getting any better for Irish savers. In fact, it could be getting worse. New figures show that Irish savers continue to earn the lowest return on their deposits, and the trend remains downwards.

According to Raisin, a provider of pan-European deposits, which has yet to venture into the Irish market despite its intentions to do so, Ireland is the Xand currently offers savers an average return on new deposits of just 0.03 per cent. This means that €10,000 invested at such a rate will return just €3 after a year, while €100,000 will earn just a paltry €30. Rates are also very low – but not as low – in Spain (0.04%); Belgium (0.16%) and Portugal (0.13%).

“Ireland persists with the lowest rates in Euro territory,” the survey says, noting that savers in other Euro zone jurisdictions continue to benefit from much higher rates.

Top of the pile is the Netherlands, where savers can earn an average return of 1.22 per cent on their deposits, or France, where a return of 1.1 per cent is possible. Achieving such a rate would boost the return of our saver with €10,000 to €122 or €110 a year, while our saver with €100,000 on deposit would see their return rocket from just €30 to €1,220 in the Netherlands.

And not only is the Irish rate the lowest, but it is also getting worse, regardless of the fact that the European Central Bank hasn’t touched interested rates in recent years. Indeed average Irish deposit rates are down by 57 per cent on this time last year, the Raisin survey shows. This trend is right across deposit rates, with rates down by 19 per cent in the Netherlands and by 12 per cent in France.

Longer term savings
When it comes to longer rates, Irish savers do a little bit better, with an average one-year rate of 0.38 per cent, bringing an annual return on €10,000 up to €38. It is again, however, the lowest rate on offer in the Euro zone, and lags far behind Italy (1.72%) and Germany (1.01%).

When it comes to three-year rates, Ireland has a higher rate of 0.47 per cent, but again, this is the lowest, behind Italy (2.25%); Germany (1.29%) and France (1.32%).

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European shares tumble amid trade tensions

European shares tumble amid trade tensions

European shares dropped broadly on Thursday as investors shunned risky assets while waiting to see whether United States and China manage to avoid a trade war which would damage the global economy.

The pan-European STOXX 600 index had dropped 0.7pc by 0720 GMT, touching a fresh four-week low.

US President Donald Trump said on Wednesday that China “broke the deal” it had reached in trade talks with the United States, and vowed not to back down on imposing new tariffs on Chinese imports.

As the world’s largest economies resume two-day trade talks on Thursday in Washington, investors were on the edge to see if a last minute truce could avert a sharp increase of tariffs on $200bn worth of Chinese goods on Friday.

More than seven major sectors lost above 1pc. Tariff-exposed auto stocks slid 1.6pc decline while semiconductor stocks also lost ground.

Adding to chipmaker’s woes was Intel’s uninspiring full year outlook.

Losses in heavyweight bank stocks weighed the most, with results from some of the biggest Italian banks in focus.

Italy’s third largest lender, Banco BPM dropped nearly 6pc after reporting a halving of loan-loss provisions for the first quarter.

Meanwhile, the country’s biggest bank by assets UniCredit dipped even after it reiterated its 2019 targets and posted a net profit above analyst expectations.

Among the biggest decliners were shares of ArcelorMittal after the world’s largest steelmaker cut demand forecast for its key markets and said it was facing the twin challenges of lower steel prices and reduced consumption in Europe.

German wholesaler Metro slid after reporting another quarter of falling sales at its Russian business and its Real hypermarkets, which the company is in the process of selling.

Swiss drugmaker Novartis dipped on a deal to buy Takeda Pharmaceutical’s eye drug assets for $3.4bn.

Shares of Norway’s Equinor came under pressure after wage talks between Norwegian oil firms and their employees broke down.

Investors sought safety in defensive stocks such as telecom, utilities and real estate which eked out the smallest losses.

Germany’s Rheinmetall was the top percentage gainer on the STOXX 600 after it confirmed its outlook and reported a rise in revenue in the first quarter, mainly driven by its booming defence unit.

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Irish and Spanish bond sales could underline move away from ‘periphery’

Irish and Spanish bond sales could underline move away from ‘periphery’

Irish and Spanish borrowing costs were close to record lows today ahead of planned bond sales that could well cement their move away from the “periphery”.

This is a phrase used to describe the lower-rated and more volatile euro zone bond markets.

Even though political issues are clouding the outlook for both countries, with Spanish coalition talks rumbling on and an uncertain Brexit outcome hanging over Ireland, their debt has been in heavy demand in recent weeks.

Benchmark Irish 10-year bond yields were close to their lowest since December 2017 at 0.495% while Spanish 10-year yields were near a two and a half year low at 0.96%.

Analysts expect to see strong demand as both countries prepare to sell long-dated debt – Ireland in the shape of a 30-year syndicated debt issue and Spain with an auction of five, 10 and 30-year debt.

Ireland has had a Single A rating from all three of the main credit ratings agencies for a while now, and Spain has more recently been upgraded into Single A status by two out of the three; S&P Global and Fitch.

This represents an improvement from the days of the euro zone debt crisis of 2010-2012.

The both countries had needed euro zone bailouts and Spain teetered on the edge of a junk rating and Ireland dropped into the Triple B ratings bucket.

An inconclusive Spanish election earlier this month and questions over the Spanish deficit and the separatist issue in Catalonia have not been a barrier to investor demand for Spanish government debt.

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China’s exports fall ahead of crucial trade talks

China’s exports fall ahead of crucial trade talks

China’s exports fell more than expected in April while imports rose, official data showed today ahead of high-stakes talks aimed at resolving a trade war with the US.

The world’s two leading economies face a possible make-or-break moment when top negotiators meet in Washington this week following months of fraught talks.

US President Donald Trump has upped the ante with plans to more than double tariffs on $200 billion in Chinese goods on Friday, the last day of a two-day visit by President Xi Jinping’s point man Vice Premier Liu He.

The trade war has battered shipments between the economic giants.

In April, China’s exports across the Pacific fell 13.2% from a year earlier, while imports from the US fell 25.7%, according to the data from China’s customs administration.

The politically sensitive trade surplus with the US remained large, widening to $21 billion last month from $20.5 billion in March. Last year it hit a record $323.3 billion.

Global markets have taken a beating this week as investors grow increasingly concerned that the China-US trade deal, which last week appeared all but ready to sign, could fall through.

US negotiators accused Beijing of reneging on commitments made during months of talks focusing on clamping down on theft of US technology and reducing China’s massive subsidies.

Analysts said that if Trump’s threat becomes reality, it will be a game changer for the global economy.

They added that the worst-case scenario would result in a US recession and a rapid reduction of growth in China.

Tepid global demand for China’s goods have heightened the risk for Beijing, which posted 6.4% economic growth in the first quarter, having decelerated every quarter last year.

China’s exports to the world sank 2.7% on-year last month while imports rose 4%, producing a trade surplus of $13.8 billion.

Economists polled by Bloomberg had expected a 3% rise in exports with imports projected to fall 2.1%.

Beijing has moved to jumpstart its cooling economy this year with massive tax cuts and fee reductions, and a targeted reduction in the amount of cash that small and medium-sized banks must hold in reserve announced on Monday.

But the central bank has yet to cut interest rates.

In March China’s exports unexpectedly jumped 14.2%, and analysts caution it is difficult to compare trends at the start of the year due to the Chinese New Year holiday, which fell in February.

Over the first four months of the year China’s exports rose only 0.2% on-year while imports dropped 2.5%, both down from the final quarter of last year.

Data last week showed China’s factory activity softened in April, with the new export orders sub-index rising from March, but remaining in contraction territory.

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