TRICHET SET TO UNVEIL ECB'S BOND PLAN TODAY - The European Central Bank meets later today and it is widely expected that it will keep interest rates on hold. It is also expected that Jean-Claude Trichet will announce a €60 billion bond purchase scheme, designed to steady the economies of major euro zone countries such as Germany, Spain and France. It is also likely that the ECB will issue fresh downward forecasts. In March it said it expected Europe to decline by 2.7% this year and analysts are forecasting that this figure will probably be revised to -4%. Figures published yesterday showed that the euro zone economy had already contracted a record 2.5% in 2009 and by 4.8% over 12 months.
Simon Barry, economist with Ulster Bank, says the ECB last month announced its intention to embark on a new covered bond purchasing scheme, which is an area of funding for mortgage markets among other areas of finance. The scheme is worth €60 billion and the details of how, when and where the bank is going to purchase those bonds will be unveiled this afternoon in Frankfurt. Mr Barry says that by the standards of other central banks, including the Bank of England the US Federal Reserve, €60 billion is actually very small as it amounts to under 1% of what the euro zone's GDP was in 2008. He says the ECB was very keen last month to emphasis that expanding the money supply was not really its aim. He said it is simply trying to improve the functioning of this market, which it deems quite important in terms of mortgages in the euro zone economy.
The economist also says that the ECB is set to revise down significantly its forecasts for euro zone growth. While not expecting any moves on interest rates today, Mr Barry says that the euro zone central bank is - apparently - open to the possibility of rates falling below the 1% level. But he says there are some considerations which may be argued against any more rate cuts - the monthly indicators on business confidence and activity in the euro zone are starting to turn in the right direction and oil prices are also starting to increase quite significantly. He says he expects that Mr Trichet will reveal that anything is possible on rates in the next few months.
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MORNING BRIEFS - Japan's corporate sales, recurring profits and capital spending all fell at record rates in the first quarter, a government survey has shown. Profits fell by almost 70% according to the country's finance ministry - the sharpest drop since 1955 and the seventh quarter of declines in a row. Combined sales slumped by over 20%.
*** Figures from Ernst and Young show that the number of jobs created by foreign direct investment last year increased by 56%. The auditors say that 6,300 jobs were created in Ireland in 2008, compared to just over 4000 the previous year. The firm's Country Attractiveness Survey for 2008 also lists Ireland as ninth overall in terms of its position in the top 15 most attractive destinations for inward investment in Europe. 108 FDI projects were announced here in 2008, a 35% increase on the 80 announced the previous year.
*** On the currency markets, the euro is worth $1.4162 US cents and 87.2 pence sterling.
