Global stocks hold highs in rate-cut bet

Global stocks hold highs in rate-cut bet

World stocks held near two-week highs as investors bet on a worldwide wave of central bank stimulus, with expectations growing that the US and the eurozone may deliver interest rate cuts as early as July.

Markets have been fired up by European Central Bank president Mario Draghi’s Tuesday volte-face on policy easing. In one of the biggest policy reversals of his eight-year tenure, Draghi flagged more easing if inflation failed to pick up.

But some caution seeped in after the previous day’s frenzy.

German and US bond yields, which hit record lows and two-year lows respectively after Draghi’s comments, inched around three basis points higher on the day.

European shares slipped off six-week highs and Wall Street futures indicated a slightly weaker opening on Wednesday.

Some of the trepidation is down to expectations that US Federal Reserve would follow the lead of the European Central Bank and open the door to future rate cuts.

“We see now that central banks will try assertively to generate inflation so this would reinforce our positivity on risk assets overall,” said Justin Onuekwusi, portfolio manager at Legal & General Investment Management.

Market sentiment has been buoyed also by news that Trump will meet Chinese leader Xi Jinping at the G20 summit this month, even though many doubt the two men can reach a breakthrough on ending their trade dispute.

MSCI’s global equity index rose 0.4pc, adding to Tuesday’s 1pc gain, as Asian shares excluding Japan followed the lead of their European and US counterparts to jump almost 2pc – their biggest one-day rally since January.

Tokyo and Shanghai also climbed almost 2pc while Australia’s main bourse hit an 11-year high. New York’s S&P500 jumped almost 1pc on Tuesday to approach recent record highs.

All eyes are now on the Fed, with chairman Jerome Powell holding a news conference after the announcement.

As for Europe, markets have almost fully priced a cut in September, though some analysts, such as those at Germany’s Commerzbank, now say rates will be cut as early as July.

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Wage rises slow down below rest of the EU

Wage rises slow down below rest of the EU

The pace of wage growth in Ireland slowed dramatically to 2.2pc between January and March, under-performing the eurozone average for the first time since early 2017.

Meanwhile, the level of job vacancies here was the third lowest in the currency bloc, indicating the economy may not be overheating.

The data released by European Statistics agency Eurostat showed wage gains here have fallen off dramatically since the final quarter of last year when they came in at 3.2pc. This was seen as a sign the economy was getting close to full employment.

In the first quarter of this year, wages in the eurozone as a whole rose by 2.5pc, a 10-year high.

“The country breakdown shows much of the increase in wage inflation was in the economies which have been struggling for the past year or so,” consultancy Capital Economics said.


“In practice, we think labour cost growth is more likely to be stable in the coming quarters, given the loss of momentum in the economy and the evidence from business surveys that the labour market is no longer tightening.”

A separate release from Eurostat showed job vacancy rates here stood at 1pc, well below the 3pc average in the euro area, another measure suggesting demand for labour looks to be slowing.

The economy here is expected to grow by around 4pc this year, unless there is a hard Brexit, down from 6.7pc in 2018.

Over the course of 2018, some 63,000 jobs were created on a net basis and the Department of Finance is expecting 50,000 new jobs will be created this year.

There are still skills shortages in healthcare, finance and engineering, according to a new study by the Central Bank of Ireland and jobs website

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Tax rises needed to prevent economy overheating – ESRI

Tax rises needed to prevent economy overheating – ESRI

The Economic and Social Research Institute says the economy is now growing so strongly that the Government should increase taxes to avoid overheating, notably through increasing taxes on carbon and property.

But it also says the Government should avoid tax increases if there is a no-deal Brexit.

In its latest quarterly bulletin, the ESRI says the economy should grow by 4% of GDP this year and 3.2% next year.

It expects unemployment to average 4.5% this year, falling to 4.1% next year.
Private consumer spending is expected to grow by 2.5% and 2.3% respectively, but Government current spending will grow by 7% this year and 5.3% next year.

Investment is forecast to grow by 7.1% this year and 7.6% in 2020, while inflation is expected to be 1.4% and 1.7% in those years.

The Irish economy is growing strongly and is probably performing at full capacity.

Unemployment is down to 4.5%, wages are growing at about 4%, and the Government is spending more, especially on a very large investment programme.

Such is the pace of spending and output growth, the ESRI says the Government ought to take some of the heat out of the economy by raising taxes, particularly carbon tax and property tax, leaving taxes on labour alone so as not to harm employment.

The authors write: “Given the expected increase in capital expenditure over the short to medium term, it may be advisable to run an explicitly counter-cyclical fiscal policy and instigate a mildly contractionary budget.

“Taxation increases in the area of carbon taxes or residential property taxes could be used to reduce some of the demand – side pressures which are now evident in the domestic economy.”

It also warns that the planned increases in the Government’s capital programme for building infrastructure needs more careful management.

It said avoiding cost escalations such as the National Children’s Hospital, requires “improvements in the process of overseeing such projects are required” to ensure the initial estimates of the project costs are much closer to the final costs.

But these projections assume Britain stays in the EU. In the event of a no-deal Brexit, the economic shock will cut the growth rate by about two thirds.

Indeed, the ESRI says the prospect of Brexit is already having an impact on the economy by depressing consumer confidence and spending.

It says the usual determinants of consumer sentiment, notably unemployment and inflation, are both extremely low, and cannot account for the sharp deterioration in consumer sentiment observed over the past eight or nine months.

Given the past data on the link between sentiment and spending behaviour, the ESRI believes the economy has already been adversely affected by the amount of attention on Brexit and the uncertainty surrounding it.

If there is a no-deal Brexit, it says contractionary budget policy would have to be abandoned in favour of measures to support the economy.

All of which makes framing October’s Budget extremely difficult.

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Oil jumps 3% towards $64 as US drone downed in Gulf

Oil jumps 3% towards $64 as US drone downed in Gulf

Oil rose more than 3% towards $64 a barrel today after Iran shot down a US military drone, raising fears of a military confrontation between Tehran and Washington.

Expectations that the US Federal Reserve could cut interest rates at its next meeting, stimulating growth in the world’s largest oil-consuming country, and a drop in US crude inventories also supported prices.

Brent crude, the global benchmark, was up $2.06 at $63.88 a barrel this afternoon, having earlier gained 3.4% to $63.93.

US West Texas Intermediate crude rose $2.33 to $56.09.

The drone was downed in international airspace over the Strait of Hormuz by an Iranian surface-to-air missile, a US official said.

Iran’s Revolutionary Guards said the drone was flying over southern Iran.

Tension has been rising in the Middle East, home to over 20% of the world’s oil output, after attacks on two tankers near the Strait of Hormuz, a chokepoint for oil supplies.

Washington blamed Tehran for the tanker attacks. Iran denied any role.

Concern about slowing economic growth and a US-China trade dispute has pulled oil lower in recent weeks. Brent reached a 2019 high of $75 in April.

Also propelling oil higher today was a decline in US crude inventories and the prospect of prolonged supply restraint by producer group OPEC and its allies.

US crude stocks fell by 3.1 million barrels last week, more than analysts expected, the Energy Information Administration said yesterday.

Meanwhile, the Organization of the Petroleum Exporting Countries and allies including Russia agreed this week to meet on July 1-2, ending a month of wrangling about the timing.

The coalition known as OPEC+ looks set to extend a deal on cutting 1.2 million barrels per day of production. The deal expires at the end of June.

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14.1% of Irish households have income above €100,000 – CSO

14.1% of Irish households have income above €100,000 – CSO

New figures from the Central Statistics Office show that median gross income for households stood at €45,256 in 2016.

The incomes ranged from a low of €32,259 in Donegal and €34,800 in Leitrim to a high of €66,203 in Dún Laoghaire-Rathdown and €58,795 in Fingal.

Meanwhile, households in Malahide had the highest median income of €78,631 of all 41 towns in Ireland with a population of 10,000 or over.

Celbridge had the second highest at €64,877 while Maynooth was third at €64,529.

The towns with the lowest medians were Longford at €29,224, Enniscorthy at €31,049 and Ballina with €32,779.

The CSO said its figures show that 62.6% of Irish households had a gross income of less than €60,000 in 2016, while only 14.1% had an income above €100,000.

The CSO noted that in 26.6% of households, social welfare payments made up more than half of the income.

Social welfare payments to people of working age made up more than half of the income in 13.7% of households while the state pension formed the majority of income in 12.9% of households.

Today’s CSO report also found that household incomes are impacted by factors such as gender, general health, education and the place and type of work undertaken.

Included in the findings from the CSO’s Geographical Profiles of Income in Ireland figures is the fact that the highest median earned income in 2016 was for the ICT, Scientific & Recreation sectors at €37,037.

The CSO also noted that about four euro in every ten earned by residents of Sligo, Leitrim and Donegal came from the Public Service, Education and Health sector.

It also found that households who were owner occupiers with a mortgage had the highest median income at €68,149 in 2016.

Households renting from a local authority had the lowest median income at €25,202, compared to households renting from a private landlord, who had a median income of €41,695.

And owner occupiers, where the house is owned outright, had a median income of €37,733. Most pensioners fall into this category, the CSO said.

Meanwhile, average rents made up more than 33% of household disposable income for tenants in South Dublin, the highest proportion in the country.

The lowest was 21.1% in Longford and compares to the state average of 29.

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Household deposits see biggest quarterly increase since 2008

Household deposits see biggest quarterly increase since 2008

Household deposits grew by €1.8 billion, or 1.8%, over the first quarter of 2019, new figures from the Central Bank show today.

The Central Bank said this marked the largest quarterly increase in household deposits since the fourth quarter of 2008 and comes despite the low interest rates people on getting on their savings.

In annual terms, household deposits continued to grow, increasing by €4.5 billion (4.7%) and marking the 18th consecutive quarter of annual growth.

The Central Bank noted that net new lending for house purchases was €1.1 billion in the year to the end of March – the largest annual increase since late 2009.

Meanwhile, other personal lending increased in net terms by €135m over the quarter.

According to the Central Bank, new lending exceeded drawdowns by €619m in the 12 months to the end of the first quarter of this year.

This was the largest annual increase in personal lending since third quarter of 2017, it added.

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Broadcasting regulator retains cap on radio ownership

Broadcasting regulator retains cap on radio ownership

A cap on the ownership of commercial radio stations has been maintained by the Broadcasting Authority of Ireland, despite calls from some stakeholders for its removal.

The BAI today published its revised policy on the ownership and control of Ireland’s broadcasters.

This sets out the criteria considered as part of a new licence application, or the proposed transfer of a service to different owners.

Included in that is a bar on an individual or group owning more than 25% of the country’s commercial radio services, something that has been retained in the 2019 update.

Some submissions received as part of the consultation process – from companies including Communicorp and The Wireless Group – called for the rule to be relaxed or removed entirely.

They argued that ownership should be considered in the context of all types of media, as opposed to solely radio, and said the growth of digital platforms made the existing cap less relevant than before.

In a statement the BAI said it had given “careful consideration” to those calls, however it remained of the view that the upper limit was “appropriate”.

The updated policy also sets out new criteria to consider when judging the character of those seeking ownership of a broadcast licence.

This includes looking at whether an individual has had adverse findings made against them in relation to tax, gross professional misconduct or anti-competitive conduct.

The BAI will also now consider whether there is “sufficient and demonstrable commitment to achieving and sustaining impartial, credible and independent journalism” as part of a broadcaster’s proposed news and current affairs programming.

Alongside its revised document on ownership the BAI also published its new Media Plurality Policy, which clarifies the measures taken by the association to promote a greater diversity of content and ownership amongst broadcasters.

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Oil prices fall 1% as economic worries outweigh tanker tensions

Oil prices fall 1% as economic worries outweigh tanker tensions

Oil prices slipped more than 1% today as signs of an economic slowdown amid international trade disputes began to outweigh supply fears stoked by attacks on oil tankers in the Gulf of Oman last week.

Brent futures were down 68 cents, or 1.1%, to $61.33 a barrel today, having gained 1.1% on Friday.

US West Texas Intermediate (WTI) crude futures were down 58 cents, or 1.1%, at $51.93, having firmed by 0.4% in the previous session.

“China’s industrial output growth (is) falling to the lowest level in 17 years amid trade tensions with the US. Today, oil markets will have to digest more demand concerns as India implemented retaliatory tariffs on a number of U.S. goods yesterday,” consultancy JBC Energy said in a note.

Also sapping prices was the dim outlook for oil demand growth in 2019 projected by the International Energy Agency (IEA) on Friday, citing worsening prospects for global trade.

Market expectations of a price rise had been shrinking in the period leading up to the tanker attacks.

Though danger of an immediate confrontation over last week’s tanker attacks – which the US blamed on Iran but Tehran denied – appeared to recede, tensions over the strategic route remain high.

A fifth of the world’s oil passes through the Strait of Hormuz.

US Secretary of State Mike Pompeo yesterday said that Washington does not want to go to war with Iran but will take every action necessary, including diplomacy, to guarantee safe navigation in the Middle East.

Prices received no boost from comments by Saudi energy minister Khalid al-Falih today reiterating that OPEC was moving was towards a consensus on extending a production cut agreement in a meeting he predicted would convene in the first week of July.

The Organization of the Petroleum Exporting Countries plus Russia and other producers, have a deal to cut output by 1.2 million bpd from January 1.

The pact ends this month and the group meets in the coming weeks to decide its next move.

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Extra security steps coming to online shopping and banking

Extra security steps coming to online shopping and banking

Consumers are being encouraged to familiarise themselves with upcoming changes to their online shopping and banking.

New European Union regulations come into full force on 14 September, which will see additional security measures required for electronic transactions.

That could, for example, involve an additional step for a customer logging in to their bank account online. It may also see additional verification, such as a code sent via text, being required in order to complete an online purchase.

The Banking and Payments Federation is today rolling out a public awareness campaign around the changes, which are part of the EU’s second Payment Services Directive (PSD2).

It says that the new security measures may differ from one bank to another, but they are all ultimately being introduced to protect customers.

Banks will soon begin to contact account holders with more information on the changes, which customers are being encouraged to read carefully.

In addition to enhanced security measures, PSD2 will also allow third parties to offer services to customers through their bank accounts.

This might allow customers to more easily manage their finances across multiple bank accounts, or securely share statements as part of a loan application.

Customers will get to decide which third parties they use and can revoke access at any time. BPFI also notes that these companies will be regulated in a similar way to banks themselves.

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Residential property price growth slows to 3.1% in April

Residential property price growth slows to 3.1% in April

New figures show that Dublin residential property prices grew again at a slower pace in April than the rest of the country.

The latest residential property price figures from the Central Statistics Office show that prices nationwide rose by 3.1% in April compared to the same month last year.

This is the lowest rate of price growth since the recovery in prices began in 2013 and compares with an increase of 13.3% the same time last year.

Dublin residential property prices rose by 0.5% in the year to April, with no change in house prices and apartments rising by 2.2%.

The CSO noted that the highest house price growth in the city was in South Dublin at 4%, while Dun Laoghaire-Rathdown saw the greatest decline in house prices with a fall of 1.5%.

Residential property prices in the rest of the country rose by 5.6% higher in the year to April, with house prices up by 5.8% and apartments by 5.9%.

The region outside of Dublin that saw the largest rise in property prices was the Border with growth of 11.4%, while the smallest rise was recorded in the Mid-East at 1.5%.

The CSO has calculated that property prices nationally have increased by 81.9% from their trough in early 2013.

Dublin residential property prices have risen 91.9% from their February 2012 low, while residential property prices in the rest of Ireland are 79.9% higher than at their trough in May 2013.

Today’s CSO figures show that households paid a median price of €250,000 for a home in the 12 months to April 2019.

The Dublin region had the highest median price of €366,000l. Within the Dublin region, Dún Laoghaire-Rathdown had the highest median price at €537,000, while Fingal had the lowest at €331,887.

The CSO noted that the highest median prices outside Dublin were in Wicklow at €315,000 and Kildare (€295,000). Tthe lowest was €100,000 in Longford and Leitrim.

The CSO also said that a total of 44,598 household dwelling purchases were filed with Revenue in the year to April.

Of these, 30.7% were purchases by first-time buyer owner-occupiers, while former owner-occupiers purchased 52.2%. The balance of 17.1% were acquired by buy-to-let purchasers.

Revenue data shows that there were 1,005 first-time buyer purchases in April, an increase of 5.7% on the 951 the same time last year.

These purchases were composed of 310 new homes and 695 existing homes.

Commenting on today’s figures, Goodbody economist Dermot O’Leary said that while the house price data may somewhat lag market developments, it is clear affordability, binding mortgage rules and a higher stock for sale continues to weigh on price growth.

“In contrast, rapid employment growth, rising earnings and a pick-up in mortgage approvals should provide support,” he added.

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