ECB SET FOR ANOTHER RATE CUT AND 'UNCONVENTIONAL MEASURES' -
The European Central Bank will continue its rate cutting today but it looks as if this will be the last in the current sequence. As a result of today's expected cut of a quarter of one per cent, interest rates will reach a record low of 1%. The ECB is expected to go further today and announce a series of measures aimed at kick-starting economies in the euro zone. It has promised a number of what it calls 'unconventional measures'. For those with tracker and variable mortgages, the quarter of one per cent cut translates into a monthly saving of about €40 and brings to nearly €600 the total monthly saving since the ECB rate cutting began last October.
Ulster Bank economist Pat McArdle says the markets are taking it almost as a virtual certainty that the ECB will cut euro zone rates by a quarter of a percentage point today to 1%. ECB watchers had been expecting a half a percentage point cut last month, which the ECB failed to deliver as it opted for a quarter percentage point reduction. He says the rate cuts have worked, but to a very limited extent. The most recent survey on bank lending in the euro zone was just slightly more positive. But he points out that about 70% of ordinary company financing comes from banks - it is the opposite in the US - and therefore it is critical to get that channel of credit flowing.
Danny McCoy, from IBEC, explains that the normal conventional way of getting money into the system is through bank lending. The unconventional methods would be if the ECB decides to bypass banking and go straight to the corporate sector and take in corporate bonds directly from companies and give out money in return. The ECB may also turn to sovereign or government bonds, which is also known as quantitative easing. Other central banks like the Bank of England and the US Federal Reserve have gone down this route. Mr McCoy says that while the ECB has been slow to adopt such measures, it may announce such methods to ease the credit crunch.
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MORNING BRIEFS - The Irish Times reports today that an international adviser to big institutional shareholders is seeking to table resolutions at the annual general meetings of five Irish companies in the coming weeks that would give shareholders a chance to vote on executive pay levels in the companies. Manifest, which casts proxy votes for institutional clients, is seeking to table the 'say on pay' resolutions at the agms of Bank of Ireland, C&C, Independent News and Media, Elan and DCC.
*** Luxury sports car maker Porsche said last night it would merge with its fellow German car firm Volkswagen, more than three years after first making a takeover bid for it. A joint task force of both companies would work on setting up a merged entity, Porsche said in a statement released after a meeting of managers from the two firms and Porsche's owners in Salzburg, Austria. The merged group would have ten separate car brands under one management, it said.
*** Oil prices hit a five-month peak above $56 last night as traders welcomed economic data from the US, the world's biggest consumer of energy, that was not as bad as expected.
*** France's Société Générale said this morning it suffered a net loss of €278m in the first quarter due to writedowns and higher risk costs.
*** Japan's Nintendo has announced its biggest ever profit - $2.8 billion for the 12 months to the end of March. The company said brisk sales of its Wii and DS consoles played a big part in the profit making and the business was proving fairly recession proof.
*** On the currency markets, the euro is worth $1.33 and 88 pence sterling.
