EUROPEAN BANK FUNDING CONCERNS PULL MARKETS LOWER - Overnight the three main share indices in the US closed down by around 3%, their lowest level in seven months. This morning Hong Kong's Hang Seng is down slightly while the Nikkei in Tokyo is down by almost 2%. This comes after European shares fell yesterday, ahead of European banks repaying €442 billion in debt to the European Central Bank. The one-year ECB loans formed part of the emergency support measures the central bank put in place at the height of the financial crisis. The markets think this scaling back of support for the banks may be coming too soon, and raises concerns about their ability to raise money on the interbank borrowing markets.
Oliver Gilvarry, head of research at Dolmen Stockbrokers, says the Irish banks are facing the same funding problems as their European counterparts. Mr Gilvarry says that the ECB is still making funds available for the banks but for shorter terms. He says that the one year loans had an interest rate of 1% and some of the shorter term loans will be priced at similar levels. But the funding costs in the future remain a bit of a grey area, he admits.
The analyst says that the ECB is to reveal tomorrow how much it will lend banks for three months. He says that a figure of up to €250 billion would be a positive sign, but anything over €300 billion would be negative for the euro zone's banks. He also says that apart from the funding issues, European banks are also faced with the issues of stress tests and sovereign debts.
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MORNING BRIEFS - Irish airlines have estimated the cost of the 1.2 million claims arising from flight cancellations following the volcanic eruption in Iceland at more than €71m. Aer Lingus cancelled over 2,000 flights affecting almost 300,000 passengers and estimates the overall cost at €20m. Ryanair cancelled 9,400 flights, affecting 1.5 million passengers and estimates its costs at €50m. Aer Arann says its claims could cost up to €1m.
*** A former oil broker was fined and banned from the industry for five years yesterday after the UK regulator said he made unauthorised trades from home, and triggered a spike in oil prices after a weekend of heavy drinking. The Financial Services Authority fined the London based former oil futures broker £72,000 for "market abuse" after he took a bet of more than half a billion dollars in Brent crude oil. He accessed the market using an internet based trading platform from his laptop in the middle of the night. The regulator said his explanation for the trades in June last year, was that he was drunk after a company golf outing. His trade pushed Brent prices up by more than $2 to over $73 a barrel, the highest level of the year up to that date. This morning oil is trading at about $75 a barrel.
*** On the currency markets the euro is trading at $1.2236 cents and 81.3 pence sterling.
