GREEK REFERENDUM NEWS TO HIT MARKETS AGAIN - European stock markets are predicted to open lower this morning after last night's news that a referendum will be held in Greece shortly, to decide on whether to accept the new EU bail-out deal for the country. Speaking last evening, Prime Minister George Papandreou said that Greece needs to spell out if the country will accept or reject the new loan contract. Last week euro zone leaders agreed a second, €130 billion bail-out, as well as a 50% write-down on its enormous debt to make it sustainable. Opinion polls show most Greeks view the deal negatively.
Charles Forelle, from the Wall Street Journal, says that Greeks would probably reject this referendum as there is a tremendous amount of anger and resentment in the country at the succession of austerity measures which have been forced on them over the past year and a half. He points out that the country has been in recession for two years and the country is still no nearer in getting market access - the whole point of the bail-outs. He says the problem has been the execution of the bail-out and not the actual design of the plan.
The journalist says that news of the referendum will again brought tremendous disruption to the euro zone and European markets. He says that it again shows that the bail-out plan is the only solution Europe has to the debt crisis and if it fails, there is nothing else. He predicts that markets will be badly affected after the news as investors move away from risky assets like stocks.
Greece does not allow referendums on economic issues but only matters of great national importance, but Mr Forelle says that this issue is about the country's fundamental existence.
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MORNING BRIEFS - Danske Bank-owned National Irish Bank has reported an operating profit, before impairment charges, of €32m for the first nine months of its financial year. Loan impairment charges of €632m were set aside, leading to an overall loss before tax of €600m. The bank's income fell by 17% to €103m because of reduced customer demand and the impact of impaired loans. Costs fell by 19% to €71m, driven by the bank's restructuring programme. National Irish Bank's total loan book was €9 billion, down 8% on last year. Commercial property loans amounted to €3.3 billion, with most of the Bank's loan impairment charges in this area. Its mortgage book amounts to €3.4 billion. NIB's chief executive Andrew Healy said that impairments remain very high mostly due to the continued weakness of the property market in Ireland. At the end of September, 2.3% of NIB's residential mortgages were in arrears of over 90 days. The industry average is about 7.2%.
*** New figures from company information website Vision Net shows that nine companies were declared insolvent every day last month. 272 companies were declared insolvent in October. Overall, out of the 14,700 companies surveyed in the sample, 41% were seen as at "high risk" of failure. And service companies now rank alongside construction firms as the most likely to fail. Vision Net says there are few real signs yet of recovery in the domestic sector, with professional service firms starting to creep in the wrong direction. It says that while the export sector is growing, weak consumer confidence continues to hamper growth in domestic companies.
*** China has reported an unexpected drop in manufacturing activity raising fresh concerns about the impact of a global slowdown on its economy. China's Purchasing Managers Index (PMI) fell to 50.4 in October from 51.2 in the previous month, the first drop in three months. The data comes amid fears that a slowdown in the global economy may dent demand for Chinese goods, and authorities warned that growth may slow even further.
*** A survey by the Small Firms Association has found that the pace of job losses among its member companies has slowed, and that 20% of firms plan to take on permanent staff in the next three months. Overall, the survey showed that the rate of job losses and the reduction in employee hours had slowed.
*** On the currency markets the euro is trading at $1.38 and 86 pence sterling.
