SPECULATIVE MONEY MOVES TO SPAIN AHEAD OF ELECTION - This morning German bund futures are higher, with the rest of the euro zone government bond market under pressure, as investor fears the euro zone debt crisis could now hit the bigger economies like France. The yield premium of French bonds over German Bunds rose to their highest since April yesterday and the cost of insuring French debt against default hit record highs. Meanwhile in Spain, the yield on its benchmark 10-year bonds soared to 6.25%, not far short of the 7% rate considered unsustainable.
Joe Haslam, from the IE Business School in Madrid, says the speculative money has moved from Italy and Greece to target countries like Spain - he says the markets always win. He says the Spanish Partido Popular party seems set to win this weekend's general election as unemployment in the country hits 5 million. He says the electorate are so disillusioned with the current government, that the opposition has not had to put forward much of a programme. But he says the fact that they should win a majority should make passing unpopular measures easier in the coming months. He says the new government will have to make big cuts, recapitalise the banks so as they will be able to lend to businesses and people as well as reform the labour market. He warns that austerity measures take time to work through the economy and the cuts will hurt economic growth.
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UNITED DRUG REVENUES AND PROFITS INCH HIGHER - United Drug has reported revenues this morning that were 1% ahead of last year's figures. It also reported operating profit growth of 4% for the year and profit before tax up 1%. Two-thirds of its earnings are now generated outside of Ireland and the firm has taken steps to address the more challenging environment facing its Irish business with a restructuring that will deliver significant cost savings in 2012.
United Drug's chief executive Liam Fitzgerald says that the company's restructuring will save it 5m a year. He says the cost cutting measures are necessary as health care budgets in its markets, including Ireland and the UK, are suffering from the effects of austerity measures. The company has made 150 redundancies in recent months and Mr Fitzgerald said these were necessary to maintain a competitive business. United Drug's CEO says he is pleased with the continued internationalisation of the group.
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MORNING BUSINESS - Paddy Power has announced its buying CT Networks, or Cayetano, a games developer based in the Isle of Man. In an interim management statement issued this morning the company said that the strong growth seen in the first half of this year has continued. Its UK and Irish online business stands out, it says, increasing sportsbook amounts staked by 31% and gaming revenues by 33%. As expected, its Irish retail operations saw growth in bet volumes but a reduction in the average stake per bet.
*** Investors yesterday were getting out of countries like France and Spain - even Finland, Holland and Austria. France and Austria have AAA ratings and the premium that these countries now pay over what Germany pays - the spread - got so big that investors say they no longer deserve top credit ratings. The rise in bond yields affected almost everyone except Germany. Italian yields moved through 7% for the second time in a week. That is the level at which Ireland and Portugal were forced into international financial programmes and Spain was also getting dangerously close. Spain has a big bond auction tomorrow, which will be closely watched, and general elections on Sunday.
*** On the currency markets, the euro is trading at $1.3441 cents and 85.2 pence sterling.
