AUSTRALIAN COURT RULES THAT S&P MISLED 12 LOCAL COUNCILS - An Australian judge has ruled that ratings agency Standard & Poor's misled investors by awarding its highest rating to a complex financial product that collapsed in value less than two years after it was created by ABN Amro's wholesale banking division. In its verdict, the Federal Court of Australia ruled S&P and ABN Amro had "deceived" and "misled" 12 local councils that bought AAA rated constant proportion debt obligations, or CPDOs, in 2006. The court said a "reasonably competent" rating agency could not have given an AAA rating to the securities, which were described as "grotesquely complicated".
Paul Sommerville, of Somerville Advisory Markets, says the ABN Amro product was a basket of investments dressed up to make them look better than they really were. He says the rating agencies have become a thorn in the side of many governments around the world, but the agencies are defending themselves by saying that they are only expressing ''opinions'' on various financial products. He says the Australian case will have some repercussions in Europe, but the analyst predicts that the rating agencies will most of any court cases that are brought against them.
On the markets, Paul Sommerville says an interesting 48 hours lie ahead with investors keeping a close eye on the US presidential elections and the latest austerity vote in Greece. The analyst says that markets are expecting Barack Obama to win the election and would be very volatile if Mitt Romney won. He is also expecting some upsets from Greece. The latest austerity measures are expected to be approved by the Greek parliament, but if the measures are only passed by a slim majority, it means that the government is getting weaker and may fall in the coming months, he explains.
MORNING BUSINESS NEWS - The Butterfield Fulcrum Group, a fund administration company, is expanding its operations in Dublin, creating 150 jobs with the support of the IDA to bring total employment there to 250. The new jobs will be in middle office and customer relationship management. Butterfield Fulcrum has been in Ireland since 2009.
*** Builders merchants and DIY Group Grafton has issued an interim management statement which said that revenue for the ten months to the end of October was €1.83 billion, up from €1.73 billion in the same period last year - helped along by the sterling exchange rate. UK merchanting turnover increased by 3.6% in the ten months to October, but Irish Merchanting turnover fell by 8.7%. Turnover in the Irish retailing business also fell by 10.1%.
*** Traffic figures from Aer Lingus show that the total number of passengers it flew in October, including its regional operations, increased by 0.9% to 962,000 last month compared to October 2011.