TESCO RESULTS MEET EXPECTATIONS - Grocery giant Tesco issued results for 2007 this morning. The figures from the world's third largest supermarket group were in line with expectations - it reported sales of £50 billion sterling and profits of £2.8 billion. Tesco does not break down figures for its Irish operations.
City of London analyst Justin Urquhart Stewart, of Seven Investment Management, says that Tesco's ability to grow outside of the UK has been quite successful. However, he adds that its recent expansion in the US has come under more criticism because the market there is 'fearfully rough' and is going to be very difficult for Telco to be able to carve out a niche. The analyst says the company has been doing far better in the Far East. He says the company is seeing a slowing down of expenditure in the UK as consumers there come under more pressure. Tesco is also increasing development on its non-food areas - clothes and electrical goods - but the analyst says the grocery giant will not be able to escape the overall weakness in the UK retail sector.
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DARLING HAS BANKS FOR BREAKFAST - Alastair Darling is having breakfast with the UK's mortgage lenders this morning. Justin Urquhart Stewart says that similar meetings are happening in the US, and he would not be surprised if they were going on in Europe. Governments are telling the banks that despite their problems, the key issue with the crisis at the moment is one of credit.
'Credit is the life-blood of capitalism,' he states. He says that if you take a few pints of blood from your body you'll notice a difference. 'If you take credit out of capitalism it tends to create some serious difficulties,' he adds. Mr Urquhart Stewart says the banks will ask the Chancellor for more central bank liquidity to get them through the crisis, but he adds that the central bank does not really want to bail out the weaker banks. He predicts that those weaker banks will suffer a similar fate to Bear Stearns in the US. 'We're in the mud, watch out for more blood,' he states.
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NO END IN SIGHT TO OIL PRICE RALLY - World oil prices touched new record highs above $112 a barrel in Asian trade today as supply concerns and a sluggish dollar remained key factors behind the increase. Justin Urquhart Stewart says that despite the level of speculation in the market - which probably accounts for about $20 a barrel - there seems very little chance of the current oil rally pulling back. He points out that there is no shortage of oil, but problems in the refineries and delivery coming out of key areas.
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DELTA AND NORTHWEST TO CREATE WORLD'S BIGGEST CARRIER - Delta Airlines is to buy Northwest Airlines in a multi-billion dollar deal to create the world's biggest airline, as carriers seek to counter skyrocketing fuel prices and a weak US economy. The new airline, to be called Delta, will have annual revenue of more than $35 billion and employ some 75,000 staff.
Mr Urquhart Stewart likens the deal to 'two alcoholics keeping themselves propped up'. He says that all the major American airlines are having a terrible time because of the high price of oil and also due to demand. He says the two airlines are being forced together to survive and are going to have to go through all the issues of staffing, restructuring, moving offices and getting the pilots on board, which is always a sensitive issue.
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MORNING BRIEFS - The price of both US crude and London Brent have been hitting fresh record highs overnight. US light crude gained 59 cents to $112.35 a barrel earlier this morning. It had earlier peaked at $112.48, well ahead of its previous record high of $112.21. Meanwhile, London Brent rose 41 cents to $110.25 a barrel, after earlier hitting $110.45, and surpassing yesterday's $110.01 high. The latest oil price increases are linked to a shut down in supply from the Gulf of Mexico into the US because of bad weather, and a weaker dollar which tends to boost the price of commodities like oil.
*** RTE producer Eithne Tinney won back her place on the board of EBS Building Society at yesterday's annual general meeting in Dublin. Ms Tinney was defeated narrowly at last year's AGM after losing the backing of the board. Yesterday she was voted on to one of seven available seats on the board, receiving 13,290 votes, the highest number of votes for any candidate including six board members seeking re-election.
*** Another big US financial has given an insight into its exposure to the US sub-prime crisis. Last night Wachovia, the fourth largest bank in the US, saw its share price slide more than 8% after it reported a surprise first quarter loss. Wachovia said it will raise $7 billion of capital, slash its dividend and announce job cuts. The bank says it is writing off $1.5 billion of bad housing debt and has increased its reserves 16 fold to $2.83 billion to cover future losses. Wachovia's share price has fallen by one third so far this year.
*** The papers report that a second credit union has made complaints about advice on investments provided by stockbrokers Davy. E-services and Communications Credit Union on Dawson Street in Dublin claims it invested €12.9m in various bonds but the investment is only worth €7.7m now, a loss it blames on the stockbrokers. Another credit union, Enfield Credit Union has also complained about Davy after which the Financial Ombudsman directed Davy to pay out €500,000 and refund fees and commissions. Davy is challenging that decision in the courts.
*** On the currency markets, the euro is at $1.5804 and it is back at its record high against sterling at 80.29 pence.
