US LEADERS TALK UP US ECONOMY - Both US President Obama and the chairman of the US Federal Reserve were talking about the US economy yesterday. President Obama talked about a day of reckoning for past economic follies and Mr Bernanke talked about creating a reasonable prospect of recovery in 2010, but only if efforts to get credit and financial markets normally again are successful. US interest rates are at near zero and Congress has passed a $800 billion economic stimulus plan into law. Ben Bernanke said the nationalisation of more US banks was not at hand and that news saw the main US indices recover from 12 year lows and end ten trading days of losses in a row. The Standard & Poor's gained 4%, the Nasdaq closed 3.9% higher and the Dow Jones was up 3.32%. Bank of America shares gained 21% in value while Citigroup closed 21.5% higher.
President Obama, in his debut address to Congress, vowed to lead a fearful America through its torment to emerge stronger than ever, declaring a "day of reckoning" after an age of excess ended in economic meltdown.
Christopher Thornberg, chief economist at Beacon Economics, says that Obama is known for big speeches which are full of hope. He says that while he personally enjoyed yesterday's speech, he points out that the vast majority of what he was talking about doing is not actually his decision. He is the head of the executive branch of the US government and he is simply in charge of doing what Congress tells him to do. 'In the long run, he can have all these glorious plans but his ability to push Congress to doing what he needs to have done is a separate story,' Mr Thornberg says. He adds that he hopes he can deliver on all his promises.
In the short term, the economist says that Mr Obama first of all needs to tackle the current economic downturn in the US. He has to deal with the banks, tax policies and support for local authorities. But he has to work all these things through Congress. This is where it may get dicey for him in the long term. Mr Thornberg says the president talks about cutting subsidies to the large farm organisations. He says that while this sounds good on paper, the farm states have a great amount of power in the US and it remains to be seen whether he can push those cuts through.
Describing the markets as the 'drama queen' of the economy, the economist says that the markets over-react to everything. He says a lot of the decline in the markets was actually necessary because so many of the asset values were overvalued. He says that prices are now back to more realistic levels. But he adds that the most recent falls are have gone too far and says there is hysteria in the markets. He predicts that markets will pull out of the downturn by 2010.
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MORNING BRIEFS - Gary McGann, a former director of Anglo Irish Bank, is resigning as chairman of the Dublin Airport Authority. Mr McGann, whose day job is heading up up Smurfit Kappa, said his decision had been influenced by his previous role at Anglo. Mr McGann said he acted 'with honesty and integrity' in his time at Anglo. 'But given recent commentary about events at the bank, my decision today is made in the best interests of the DAA and of Smurfit Kappa,' he said. Mr McGann quit the Anglo board in January.
*** APN, the Australian group which is 39.1% owned by Independent News & Media, has reported a 17% fall in net profits for the year to December 2008. It said its net profit after tax fell to A$140.1m, down from A$169.5m the previous year. Independent has been trying to sell its stake in the company in recent times.
*** On the currency markets this morning, the euro is worth $1.2826 US cents and 88.25 pence sterling.
