STANDARD & POOR'S COMMENTARY ON DOWNGRADES DID TAKE INVESTORS BY SURPRISE, SAYS ANALYST - The effect of the weekend downgrade of nine euro zone countries by ratings agency Standard and Poor's is being felt on international markets this morning, with falls on some of the world's major markets. The agency also put 14 euro zone states on negative outlook for a possible further downgrade.
Justin Urquhart Stewart, of Seven Investment Management in London, says that most of the Asian markets are down about 1%, but adds that he expects the impact on European markets to be less as the downgrades had been mostly factored in. He says that while news of the downgrade did not come as a shock to investors, the breadth and commentary behind it did. He says the commentary is moving into the political sphere with S&P's very critical of the level of leadership among euro zone states. He says the agency wants Europe to find a mechanism which will see a return to growth as well as better discipline among euro zone states. There is also concern about whether any more downgrades will come down the line, as several states have been put on a negative outlook. The analyst says the downgrade was especially embarrassing for France and French President Sarkozy as it comes so soon before the election.
*** In an interim management statement this morning, DCC says that weak demand for its energy products resulted in its operating profit for the third financial quarter being further behind the year before than had been anticipated. Weather conditions in Northern Europe in the three months were exceptionally mild, it says, in contrast to the very cold weather in the same period in the prior year.
*** Support services group Siteserv says in a statement this morning that in conjunction with its advisers, it is exploring a number of strategic and corporate options for discussion with Irish Bank Resolution Corporation in advance of expiration of its existing debt facilities in December 2012. At this stage the firm says it is not possible to predict the outcome of this exercise or quantify the financial impact for shareholders. It says though that the exercise is not expected to have any negative impact for staff, customers, key business relationships or suppliers.
*** Davy Stockbrokers predicts that GDP growth in Ireland will slow sharply as a euro area double dip recession looms. In its forecast for this year, Davy says it expects export growth to fall from 4.5% in 2011 to 2.8% in 2012, despite gains in competitiveness. Davy sees employment falling by 0.4% in 2012, picking up gradually in 2013. It also says the Government's fiscal planning needs to factor in possibility of less favourable economic scenarios than previously thought.
*** On the currency markets the euro is trading at $1.265 cents and 82.58 pence sterling.
