The financial markets have been trying not to panic this week. But headlines talking of “turmoil” and “bloodbath” have told the story, with echoes of 2008 as bank shares fell. By yesterday some calm had returned, but nerves remain rattled.
To use the old cliché, it was a rollercoaster week. On Monday, more than €4 billion that was wiped off the value of Irish shares when European stocks closed at their lowest level in more than two years. The last time the Iseq index had a day as bad as that, the banks were knee-deep in restructuring and we were just a couple of months from opening the door to the IMF and the EU.
After a midweek revival, things worsened on Thursday when the market was hit again, and the Iseq ended the day down 2.4 per cent, which meant it had haemorrhaged more than 15 per cent of its value since the start of the year.
Yesterday was a bit better as it rose almost 1 per cent. Next week? Who knows. Concerns continue to swirl about losses hidden in the European banking sector and more trouble could lie ahead.
The market upheavals and the fears of slowing world growth have not impinged much on the general election campaign. The domestic indicators remain strong and, with fortuitous timing, the NTMA managed to raise €1 billion in new long-term funding at a record low of just under 1 per cent. But given the Irish economy’s vulnerability to a global shock, those clouds have cast a shadow on the promises of tax cuts and increased public spending by political parties vying for votes.
Even Ibec – “the national voice of business in Ireland” – has called for the USC to be retained, branding the abolition of the €4 billion moneyspinner a “step in the wrong direction”, though it did call for hefty cuts in other areas of personal taxation.
Contrasting fortunes for Smurfit Kappa and Tullow Oil
Irish plc results are being closely watched and have been generally positive. There were contrasting fortunes for packaging company Smurfit Kappa and Tullow Oil this week.
Smurfit was celebrating a 12 per cent plus bounce in its share price on Wednesday following stellar annual results. The price held steady for the week after the company reported revenues of €8.1 billion, solid earnings growth, and a 23 per cent dividend rise. It seems the results were better than many in the market expected and their announcement led a scramble for stock. There was no such news for Tullow Oil, which announced a quarter drop in its annual revenues and losses of $1 billion, before a 14 per cent drop in its share price on the Irish Stock Exchange completed its misery. Chief executive Aidan Heavey suggested that Tullow might sell off some of assets to generate a return for shareholders, but argued strongly that it remained fundamentally sound. By yesterday the share price had recovered some ground.
Google drives ahead on two fronts
The tech race is rumbling on with positive developments for Google on two fronts. Its plan to put driverless cars on the road without steering wheels or human-operated brakes – rather worryingly – received a boost when a US transport regulator said a robot could meet the legal definition of a driver.
The company also announced it is developing a new virtual-reality headset for smartphones as it seeks to challenge Facebook’s Oculus for an early lead in Silicon Valley’s latest platform war.
Despite all the good news for the company, there is sure to have been some head-scratching among the staff down at Grand Canal Dock when it emerged the average Google employee in the UK is being paid twice as much as them. Still, an Irish Times survey showed that the big players in the sector were, on average , offering tasty salaries , with Microsoft’s 750 employees earning an average of over €145,000.
Housing crisis takes shine off news on economy
For the moment, domestic economic signals remain good. Bank of Ireland reported approving €5.3 billion in new credit to Irish small and medium-sized enterprises (SMEs) last year.
This represents an increase of about 18 per cent on the previous year, and remarks by the bank that businesses are seeking to expand and invest more will have been music to the ears of the Government parties.
They may even have followed the example of Sinn Féin leader Gerry Adams and danced a jig when the consumer sentiment index published on Monday showed confidence at a 15-year high, and that 38 per cent of consumers expect an improvement in their finances next year.
Despite all the talk of recovery, the albatross around the Government’s neck continues to be the housing crisis.
It emerged this week in the regular Daft.ie survey that the cost of renting a home increased by an average of 9 per cent over the course of last year.
A separate report based on Geo Directory data showed that the property market remains depressed with turnover of Irish residential property barely 50 per cent of what is considered “normal” in a healthy housing market. Meanwhile, Savills estimated that almost half of all property transactions last year were cash transactions.
