EU/US trade talks ‘off to good start’

European Union trade commissioner Phil Hogan said his meeting with senior US officials marked a “good start” to resetting trade ties with Washington, but there was more work to do.

Hogan told reporters he had a good exchange of views with US Trade Representative Robert Lighthizer several times during his visit, and underscored Brussels’ desire to negotiate solutions for several open disputes and avoid tit-for-tat tariffs.

He said the EU was not ready to put agriculture on the table in broader trade talks, but looking at non-tariff barriers such as phyto-sanitary standards could offer some options for breaking the impasse.

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Interest rate hike in state’s home loan scheme

The Government has sharply increased the rate of interest it will charge future first-time home buyers availing of its Rebuilding Ireland Home Loan scheme.

As a result of the changes, the 25-year fixed rate has increased to 2.745% from 2%, while the 30-year fixed rate has risen to 2.995% from 2.3%.

The move means those who in future borrow the maximum amount allowed of €288,000 will pay up to €107 more per month than those who already have their loans.

The decision comes despite growing pressure on commercial lenders to reduce mortgage interest rates here, as they are among the highest in Europe.

“In an environment where interest rates are benign and we are asking banks to reduce interest rates, it seems bizarre that Government funded mortgage products are increasing rates,” said Michael Dowling, Managing Director of Dowling Financial.

The changes also coincide with moves by certain banks to lower fixed home loan rates in an effort to attract new business.

Yesterday, for example, Ulster Bank announced a reduction in its five-year fixed rate to 2.2%, the lowest rate in the market.

Introduced in February 2018, the Rebuilding Ireland Home Loan scheme is designed to help first-time buyers on lower incomes who have been refused a mortgage by a bank.

The mortgage can be used by the borrower(s) to buy a new or second hand home, or to build their own home. 

Up to 90% of the value of the property can be borrowed under the scheme, although the maximum market values have been capped at different levels depending on the location of the property.

In counties Cork, Dublin, Galway, Kildare, Louth, Meath and Wicklow this is €320,000 while in the rest of the country it is €250,000.

Rates are fixed and both 25-year and 30-year options are available.

As the Rebuilding Ireland Home Loan rates are fixed for the duration of the mortgage, the rate changes will only apply to new loans.

In future, a 25-year Rebuilding Ireland Home Loan mortgage of €288,000, which is the maximum loan amount available, will require repayments of €1,328 per month, €107 more than that being paid by recent borrowers.

While a 30-year mortgage worth €288,000 will cost €105 more per month that it would have under the old rates, bringing repayments to €1,213 per month. 

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Dublin Port’s trade with Europe spikes as Brexit takes toll on UK

Volumes through the country’s busiest port indicate a shift from the UK to a growing trade with the continent.

Figures from Dublin Port show volumes to Britain fell by 0.2pc last year, while volumes on services to continental Europe grew 10.7pc.

Dublin Port trade volumes hit another record in 2019.

The port, whose traffic was hit in the period by work on its docks for a major expansion project, said it expected traffic with mainland Europe to continue its strong growth.

“The effect of the deployment in recent years of new ships on direct routes to continental Europe by shipping lines such as Irish Ferries and CLdN is clear to be seen, and we expect to see this trend continue as trading patterns adapt post-Brexit,” said CEO Eamonn O’Reilly.

Overall tonnage growth for the year was just 0.4pc, due in large part to construction work on the huge Alexandra Basin development, which reduced the number of ship arrivals by 71 to 7,898. Volumes were affected when ore exports from the Tara Mine were suspended for four months due to the construction.

The traffic numbers from the port showed roll-on, roll-off shipping traffic rose 2.6pc to 1.1 million units.

Containerised shipping has now recovered to pre-crash levels and volumes grew by 6.5pc to 774,000 20-foot equivalent units, the industry standard size. “Behind these growth figures, however, we saw a marked difference between the UK and the EU-26,” said Mr O’Reilly, who noted that volumes to Britain fell by 0.2pc for roll-on, roll-off and container traffic, and that it expanded by 10.7pc for Europe.

Data from the Central Statistics Office has also shown a decline in trade with Britain, which accounts for 9pc of exports, and a rise with countries in the eurozone.

The value of exports to Britain in the first 11 months of last year fell €358m, or 3pc, to €12.45bn from the same period in 2018. By contrast, exports to the eurozone rose to €48.29bn from €45.89bn.

Exporters face another year of Brexit tension, as the UK negotiates the terms of its trade deal with the bloc, and there is the threat that it could still go for a no-deal exit on commerce.

An estimate published this week by consultancy Copenhagen Economics put the potential cost to the economy of a hard trade outcome at €18bn.

“While the final impacts from Brexit remain unknown, we have completed a series of projects during 2019 in conjunction with the OPW to provide infrastructure needed for whatever level of checks are ultimately required,” said Mr O’Reilly.

In the cruise sector, 158 ships arrived, up from 150 in 2018, with a 16.7pc surge in visitor numbers to 323,234 people.

The port is spending €277m on its Alexandra Basin redevelopment, which is due to be finished next year, and will boost capacity for large ships by deepening and lengthening 3km of its 7km of berths.

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Car sales in Europe get late-year boost helped by incentives

Europe emerged as a bright spot for the embattled global car industry after car sales jumped to a record in December, but it could be short-lived.

The “exceptional” gain in Europe last month was fuelled by a 28% increase in France and a more than doubling in Sweden, where governments changed emissions-based taxes on new cars starting in 2020, the  European Automobile Manufacturers’ Association said.

Car registrations rose 21% to 1.26 million vehicles, as the late surge helped offset a weak start to 2019 and pushed full-year sales 1.2% higher, reversing a slight drop in 2018.

Sales also more than doubled in the Netherlands ahead of an increase to 8% from 4% in the tax rate for electric company cars.

By pulling forward buying, the changes could sap demand heading into 2020.

Europe’s growth contrasts with weak demand in China where sales fell 3.6% in December. 

French carmaker PSA said global sales fell 10% last year to 3.49 million units, compared with a record 3.88 million in 2018, as it suffered from declining volumes in China, the Middle East and Africa.

In Europe, the Peugeot maker’s sales declined by 2.5% in 2019 to 3.11 million vehicles, with its Opel-Vauxhall brand suffering the steepest fall, down 6.4%.

PSA was outperformed by VW and Renault in Europe.

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Soaring gold price leads to a refining boom

In a refinery just outside Uganda’s main airport, workers slip bars of freshly refined gold into clear plastic bags sealed with a sticker of the national flag — black, yellow and red — and the label “Ugandan’s Treasure.”

Uganda produces little gold of its own. Alain Goetz, who set up the refinery, says that by branding gold from abroad as Ugandan, the operation is merely imitating others — for example, the Swiss don’t mine the gold they refine in Switzerland.

The refinery, African Gold Refinery, is part of a trend across Africa. Small-scale mining is booming, and new gold refineries are opening by the dozen, to process metal produced by informal diggers in Africa and beyond.

The refineries, which often win high-level political backing, can be positive because they offer miners and states a way to extract value from their own mineral wealth rather than just exporting raw commodities.

But if not properly controlled, they risk adding to problems of smuggling and funding conflict.

Some of Africa’s new gold refineries are in South Africa, a major gold producer with an already large refining industry. There, authorities granted 19 refining licences in the year to March 2019 — as many as in the previous three years combined.

Elsewhere in sub-Saharan Africa — where until 2012 there were only a handful of refineries — as many as 26 are now either operating or under construction across 14 countries from Mali to Tanzania, including in states which mine little gold at home, a Reuters survey found.

Governments of gold-producing countries in Africa have long complained that the precious metal in their rocks is being illegally produced and smuggled out on a vast scale, sometimes by criminal operations, often at a high human and environmental cost.

By refining gold, states hope to capture value that is being lost. “The only way to stop (smuggling) is having multiple refineries in Africa,” said Frank Mugyenyi, head of the minerals unit at the African Union.

But because informal miners already often operate through smuggling networks to avoid tax and scrutiny, officials and industry sources say some refineries risk inevitably joining these shadowy channels. With so many refineries competing for gold to process, each has scant incentive to check where its gold comes from.

Just 13 of them state they can handle more than 1,400 tonnes of gold a year, worth around $70bn (€63bn). That means they could treat around twice Africa’s estimated total gold production, and nearly a third of the world’s supply.

Of 22 refineries surveyed by Reuters, 14 did not respond to requests for more information about the size and nature of their business.

Two responses to the survey showed a lax approach: One small operator, Bupe Chipando who heads Alinani Precious Metals Ltd in Kenya, said he does not yet purify gold, but just melts blocks of impure metal together and ships them overseas. Officials said they knew of at least two other African refiners who did the same thing.

Another, Robert Baker, the CEO of Bekora Miners in Cameroon, said most of the gold his refinery processed was not declared to customs, in order to avoid paying tax on metal it exports. Cameroon’s government did not respond to requests for comment.

The Organisation for Economic Co-operation and Development (OECD) developed global sourcing standards against which it recommends refineries are audited. Outside South Africa, no African refineries have yet followed that recommendation, said Louis Marechal, an OECD expert on responsible business conduct at who has travelled widely in Africa consulting with governments and companies on how to regulate and source gold responsibly.

The new refineries offer an important outlet for millions of individuals who dig for gold using basic technology.

Industrial mining companies usually fly metal they produce in Africa to large refineries accredited by the London Bullion Market Association (LBMA), the industry’s standard setter.

All but one of these is outside the continent. Concerned about the risks of rights abuses, crime or conflict in the supply chain, LBMA-accredited refineries typically steer clear of metal from informal miners.

Six of Africa’s new refineries — in Cameroon, Kenya, Mali, Rwanda and Uganda — shared output data with Reuters.

With combined annual capacity for around 270 tonnes, they currently process around 41 tonnes of gold a year worth some $2bn. For comparison, refineries in Switzerland handle around 2,500 tonnes of gold a year, worth $120bn at current prices.

Some people in the industry concede that it is hard for Africa’s new refiners to be accepted as mainstream suppliers. Large banks, jewellers and electronics makers generally only accept gold from refineries accredited by groups such as the LBMA.

– Reuters

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Housing costs push 2019 inflation rate up to 0.9% – CSO

New Central Statistics Office figures show the rate of inflation almost doubled in 2019 compared to 2018 with housing, water, electricity, gas and other fuels showing the biggest price increases since 2015.

Consumer prices rose by 0.9% in 2019, after increasing by 0.5% in 2018 and by 0.4% in 2017. 

The CSO said that during 2019, mortgage interest repayments rose on average by 2.8% compared to a drop of 0.2% in 2018. 

Meanwhile, the price of goods decreased on average by 1.1% compared to a fall of 0.7% in 2018.

The price of services – which includes mortgage interest – rose by 2.4% compared to a rise of 1.4% the previous year.

Since 2015, the CSO said that housing, water, electricity and gas and other fuel costs have jumped by 10.8%, while prices in restaurants and hotels are up 9.8% and education costs have grown by 9.2%.

The CSO also said today that consumer prices rose by 1.3% in December from 1.1% in November.

The increase came on the back of higher rents and mortgage interest repayments as well as more expensive electricity bills.

The CSO said the biggest annual price changes in December included increases in education costs, which rose by 4.1%.

The cost of housing, water, electricity, gas and other fuels increased by 3.3% due to higher rents, mortgage rates and higher electricity bills.

Meanwhile, the price of alcohol and tobacco rose by 3.1%, while prices in restaurants and hotels grew by 2.6% on the back of increase in the cost of accommodation and more expensive prices when eating out.

Transport costs also rose mainly due to an increase in air fares and higher prices for cars and services. 

However, December saw a price fall of 8.8% in the communications sector, while clothes and footwear prices were down 1.3% due to sales. The price of some foods – including vegetables, sugar, jam, honey, chocolate & confectionery and milk, cheese and eggs – were also lower last month.

On a monthly basis, the CSO said that consumer prices rose by 0.2% in December on the back of increases in the price of transport and health.

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Central Bank announces consumer and investor protection priorities for 2020

The Central Bank has said that the protection of borrowers in mortgage arrears will continue to be a key priority for it during 2020.

Derville Rowland, Director General, Financial Conduct at the Central Bank, said the bank will closely monitor the treatment of borrowers in arrears and take follow-up supervisory actions as required. 

“As part of our supervisory work, we will continue to require all loan owners to put in place long-term sustainable arrangements where possible for their borrowers,” she added.

Ms Rowland made her comments as she outlined the Central Bank’s priorities for the regulation of financial conduct in Ireland during the year. 

These priorities include strengthening consumer protection, a comprehensive review of the Consumer Protection Code and enhanced anti-money laundering measures.

Noting the lack of a consumer-focused culture within the financial services sector, Ms Rowland said it will not come as a surprise to hear that the Central Bank will continue to hold boards and leaders to account for embedding effective behaviour and cultures.

She also said the Central Bank is examining the issue of price differentiation in the motor and home insurance market to understand the extent and prevalence of the practice, how insurers are using it and whether it gives rise to unfair treatment of consumers.  

The Central Bank intends to publish an interim report on its findings at the end of the year.

“At the Central Bank of Ireland we are consistently evolving and enhancing our toolkit. Some of our priority issues will have more immediate benefits, while others will bear fruit over the longer term,” Ms Rowland said.

“I hope – indeed expect – that the 2020s will be the decade when all firms and boards put conduct, culture and customers firmly at the top of the corporate agenda,” she added.

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Dow, S&P 500 at record highs after US-China trade deal

The Dow Jones and S&P 500 rose to record highs on Wall Street last night following a volatile session marked the signing of the long-awaited US-China trade agreement. 

The Dow Jones gained 0.3% to finish at 29,030 and the broad-based S&P 500 added 0.2% to 3,289.

Analysts said the choppy trading session reflected worries about lofty US stock valuations following the market’s surge since the fall. 

“We’ve been on a tear since mid-October,” said analyst Patrick O’Hare, who said investors likely will wait for more earnings reports from big companies before moving significantly further. 

“It’s going to take a lot of good new news to get the market to take another leg higher,” he said. 

The trade deal between the world’s dominant economic powers called off some US tariffs that had been planned on Chinese goods, and obliged China to beef up purchases of American crops and other exports and provide intellectual property protections for US technology. 

Investors have cheered the deal following nearly two years of conflict in which US-China trade tensions occasionally flared, pressuring stocks. 

But Oxford Economics described the agreement as a “fragile truce”.

It warned that “while the deal is a step in the right direction, further tariff rollbacks should not be expected until after the elections, and broken promises could lead to tariffs snapping back in the coming months.” 

Among individual companies, Goldman Sachs dipped 0.2% as it reported lower fourth-quarter due in part to a one-time charge of $1.1 billion for legal costs connected to probes into the bank’s role in  the 1MDB scandal.

Among other companies reporting results, Bank of America fell 1.8% and United Health Group gained 2.8%.

Target plunged 6.6% after the big-box retailer reported disappointing sales for the critical Christmas shopping season. 

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State may exit US currency blacklist

The United States may remove Ireland from its list of potential currency manipulators next year after the State’s current account surplus turned to a deficit in 2019.

The US Department of the Treasury updated its guidance this week.

While the main decision was to remove China from the blacklist, the State was also among those that could be exempted.

Ireland and Italy were surprise inclusions in last year’s report, which applies three measures to establish whether countries use their exchange rates to boost exports to the US.

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Residential property prices rise by 1.4% in November

Residential property prices posted annual growth of 1.4% in November, the fastest growth in three months, new figures from the Central Statistics Office show.

The increase of 1.4% in November is down sharply from growth of 7.2% a year ago, the CSO said.

House prices have stabilised over the last year having shot up for five years following a crash just over a decade ago. 

Dublin residential property prices decreased by 0.7% in the year to November, with house prices down by 0.5% and apartments falling by 1.2%. 

The CSO noted that the highest house price growth in Dublin was seen in Fingal with prices rising by 3%, while Dun Laoghaire-Rathdown prices saw a decline of 6.3%. 

Meanwhile, property prices outside of Dublin rose by 3.6% in the year to November, with house prices up by 3.6% and apartments prices increased by 3.9%. 

The region outside of Dublin that saw the largest rise in house prices was the Border at 9.9%, while at the other end of the scale, the Mid-East saw a 0.4% rise.

Property prices nationally have increased by 85.7% from their low point in early 2013, the CSO figures show. 

Dublin residential property prices have risen 94.9% from their February 2012 low, while  residential property prices in the Rest of Ireland are 84.3% higher than at their low point in May 2013.

Consumers paid a mean, or average price of €295,706 for a home on the residential property market in the 12 months to November. 

The mean price in Dublin – at €438,729 – was the highest in any region or county. 

Dún Laoghaire-Rathdown had the highest mean price in the Dublin region at €600,335, while South Dublin had the lowest at €363,324. 

The CSO said that outside of Dublin, the Mid-East was the most expensive region, with a mean price of €301,142. Wicklow was the most expensive county in the Mid-East region, with a mean price of €357,831.

The Border region was the least expensive region in the year to September 2019, with a mean price of €144,090. Leitrim was the least expensive county, with a mean price of €118,733.

Today’s CSO figures also show that in the year to November, a total of 45,192 house purchases were filed with Revenue. 

Of these, 31.8% were purchases by first-time buyer owner-occupiers, while former owner-occupiers purchased 52.7% of the homes. The remaining 15.5% were acquired by non-occupiers.

Revenue data shows that there were 1,355 first-time buyer purchases in November, a rise of 1.1% on the 1,340 recorded the same time last year. 

These purchases were made up of 470 new homes and 885 existing homes, the CSO added.

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