Morning business news - April 24Thursday 24 April 2014 10.38
The pound has been gaining strength of late against the euro and the dollar against the backdrop of a steadily improving UK economy. Peter O'Flanagan, head of Trading with Clear Currency, said the euro-sterling exchange rate was more to do with the improving UK economy than attempts to talk down the euro by ECB chief, Mario Draghi.
"The UK recovery goes from strength to strength and exceeds expectations. The Bank of England had hoped to see unemployment fall to 7% and talked of raising rates in mid 2015. But unemployment fell to 6.9%. There are now expectations that rates will rise in the first quarter of next year."
He said the Bank of England minutes yesterday from its most recent meeting did not shed any extra light on when rates might go up. "What they did tell us yesterday is that they've revised first quarter growth to 1% from 0.9%. They're expecting growth to be a little more sluggish in the second quarter, but it will continue to exceed expectations."
Peter O'Flanagan said the Bank of England had scope given that inflation had moderated in recent times, but more pressing was the situation in the euro zone where inflation has been trending well below target.
"They've been vocal on negative deposit rates or some form of QE at the ECB in the last few months. Rates will probably stay on hold until a bank asset quality review is concluded. They have plenty of scope, but the high value of the euro is impacting on inflation," he stated. He said if the ECB opted for inflation, it would probably be similar to the asset purchases deployed in the US. They are slightly more restricted but they have been discussing guidelines. "They're getting a framework in place to do something," he said.
MORNING BRIEFS - Facebook's mobile user base crossed the one billion threshold during the first quarter of this year. Shares rose 2.5% in afterhours trading after the social media site posted growing earnings and ad revenue in the year, although results dipped from last quarter. Profits of $642m for the three month period beat analyst expectations. The firm said surging mobile advertising helped push first quarter revenue 72% higher, to $2.5 billion. Mobile now makes up 59% of advertising revenue, from 30% a year ago.
*** Apple disappointed expectations for sales growth but announced a 4.6% increase in revenue to $45.6 billion in the first quarter. Profits of $10.2 billion were generated after selling over 43.5 million iPhones in the three-month period to the end of March. Apple also announced plans to buy an additional $30 billion of its stock back from shareholders and to increase its quarterly dividend by 8% - moves welcomed by investor Carl Ichan who had been calling for a share buyback for some time. The stock was up more than 7% in after-hours trading.
*** Lakeland Dairies has reported a 15% increase in revenue to over €545m. Operating profits at the cross-border dairy processing co-op rose by 9% on last year to €11.7m.
*** House rebuilding costs are up marginally this year, according to the Society of Chartered Surveyors, but they are still over 20% lower than in 2008. Homeowners are being urged to check the value of a rebuild in their area and to match this with the sum insured on their home insurance to make sure that they are not paying over the odds or underpaying on premia. Cork and Limerick had the biggest increase in costs in the year for an average three bedroomed house where the rebuild costs were up by 3%. Elsewhere they were steady or up by about 2%.