DOUBTS OVER SUSTAINABLE US RECOVERY - Since peaking earlier this month, shares on US indices have been on the slide. Yesterday's consumer confidence figures did not help. Analysts had expected a rise, but confidence deteriorated sharply in October, with labour market conditions playing a major role in the fall.
Dermot O'Leary, economist at Goodbody Stockbrokers, says that while improvements have been seen in the US economy recently, the real issue is whether this growth is sustainable. He says this depends on when and whether the US consumer actually joins the party - the consumer sector in the US makes up about 70% of the economy. He says there is no sign as yet of consumers jumping on the recovery bandwagon due to the exceptionally weak US labour market. The labour market there is at a 25 year low with the unemployment rate approaching 10%. He says that in that sort of an environment, it is difficult to see any sort of substantial increase in consumer spending.
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MORNING BRIEFS - The EU will today approve Britain's plan to break up Northern Rock. This will leave the way open for a split early next year and the eventual sale of parts of the bank. The British government nationalised Northern Rock early last year after it became the first major UK victim of the credit crisis. The split is expected to produce a 'good' bank which will deal with retail deposits, retain Northern Rock's healthy assets and deliver new loans. A 'bad' bank will remain under state control to wind down its loan book. In the coming weeks the EU is expected to make statements on what divestments may be possible at RBS and Lloyds as part of their state aid process.
*** Bank of Ireland is investigating another bout of double-charging incidents on laser card transactions. Just last month nearly 120,000 of its customers were charged twice for using Laser and almost €8m was taken from people's accounts, but this was promptly repaid.
*** Two proxy advisory firms have advised Independent News and Media shareholders to vote against a resolution put forward by shareholder Denis O'Brien at next month's EGM. Glass Lewis and Risk Metrics said shareholders should vote in line with the board's recommendation to reject the resolution which would revoke the director's power to allot and issue new shares.
*** Construction equipment maker JCB has warned that it could face its first ever annual loss this year. The company says demand for construction machines would probably grow in China, but that outside China demand is likely to fall by about 50% this year.
*** On the currency markets, the euro is trading at $1.4826 cents and 90.53 pence sterling.
