ECB TO CUT RATES AS EURO ZONE ENTERS RECESSION - The European Central Bank is dealing with its first recession since its inception in 1999. The bank's remit is to worry about inflation and use interest rate increases to keep a lid on same. But the economic figures are so awful if they do not adopt a policy of cutting interest rates, then there might not really be any inflation to worry about. Last month there was co-ordinated action by central banks around the world to cut rates by 0.5%. Those were off-diary rate cuts and taken as an emergency response to the crisis in the financial markets. A 0.5% rate cut would cut the main euro zone lending rate to 3.25%. There is some talk that the cut might be more drastic today or that if the rate cut is 50 basis points, then there will be a strong signal of more to come. The Bank of England is expected to cut rates there by a similar amount taking the main lending rate to 4%.
NUI Galway economist Alan Ahearne says the markets are pricing in a full percentage point by the end of the year. There is two meetings before the end of the day - today's and one in December. The question now is what will happen in each of these two meetings. He says the likely outcome is for half a percentage point today and another similar cut next month. The economist says that the incoming data on the euro zone is 'terrible' - the euro zone is in recession with very weak activity, while inflation is easing considerably while energy prices are also falling. He says the fact that the euro zone is in recession means that firms do not have the same pricing power as they did, and all that helps to bring down the rates of inflation.
The economist says there is good reason to think that the Irish banks won't pass on today's expected rate cut in full. However, anyone with a tracker mortgage will benefit in full. He says the banks are eager to rebuild their capital positions and don't want to have fresh capital injections.
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DUNNES UP FOR SALE RUMOUR - A big meeting of senior managers is reported to be scheduled at Dunnes Stores today amidst concern among the unions that the meeting may signal a sale. There is much scepticism on that scenario from observers of the retailer, which has around a quarter of the grocery market here and a significant share of clothing and home furnishings. Dunnes has 150 odd stores with 114 of those in the south and 23 in the north with some others in Spain and Britain. Market watchers say they have seen this story come and go before and while there may be a management meeting it could be as benign as a rallying call for managers coming up to a particularly tough Christmas.
*** MORNING BRIEFS - investment holding company TVC has said its sold its interest in ChangingWorlds for $16.4m in cash - that is 3.7 times more than their original investment in the company. ChangingWorlds provides services to the mobile phone services market and includes Vodafone and O2 as customers. TVC is probably best known for its 15% stake in UTV.
*** On the currency markets, the euro is worth $1.2861 cents and 81.12 pence sterling.
