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First time buyers continue to drive mortgage market

First time buyer activity continued to drive the mortgage market in the final three months of last year, new figures from the Banking & Payments Federation Ireland show.

A total of 12,259 mortgages to the value of almost €2.77 billion were drawn down in the three months from October to December.

This represented an increase of 1.2% in volume and 5% in value on the same time in 2018.  

First-time buyers remained the single largest segment by volume (52%) and by value (53%),  the figures show.

The BPFI said that total drawdown activity for last year came to €9.5 billion – the highest drawdown value in over a decade.

Meanwhile, a total of 2,964 mortgages were approved in December, with first time buyers making up 51.7% of the total volume. Mover purchasers accounted for 25.7%.

The number of mortgages approved rose by 1.9% year-on-year but fell by 29.1% compared with the previous month.  

The BPFI said this reflects the seasonal trends generally seen at that time of the year,  noting that in the past four years, approval volumes have dropped by 28-30% between November and December. 

Mortgages approved in December were valued at €696m. First time buyers accounted for 52% of these mortgages while mover purchasers made up 29.4%.

The value of mortgage approvals rose by 6.1% year-on-year but fell by 27.5% month-on-month – again due to seasonal factors, the BPFI said.

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Stocks recover from coronavirus scares

European stock markets rebounded on Tuesday, having lost ground in recent sessions due to fears of the impact of China’s coronavirus outbreak.

Banks and luxury goods companies led the recovery, while leisure and airline stocks also clawed back losses as investors took the view that the right steps were being taken to contain the illness.

Dublin

The Iseq managed a 0.3 per cent climb, a rise that underperformed the major European indices. Building materials company CRH recovered only 0.1 per cent of its 2 per cent Monday slip to finish at €34.27.

Ryanair posted a more convincing gain, closing up 0.85 per cent at €14.84, while packaging company Smurfit Kappa was up 0.8 per cent at €31.72.

It was a good day for Glanbia, which advanced 0.9 per cent to €10.90, while another food group, Kerry, was up 0.3 per cent at €116.90.

Bank of Ireland advanced 1.75 per cent to €4.53. There were few fallers, but among them were AIB, down 0.4 per cent at €2.64, and Kingspan, down 0.2 per cent at €56.80.

London

The FTSE 100 added 0.9 per cent, while the mid-cap FTSE 250 gained 0.6 per cent. Virgin Money UK rallied 4 per cent after reporting higher loan book growth, while Irn-Bru maker AG Barr soared 15.4 per cent on the mid-cap stock’s best day since October 2005 after it forecast annual profit to be at the top end of the current market view.

Shares in Unilever, AstraZeneca and Reckitt Benckiser all climbed 2 per cent as sterling dipped on concerns about Britain’s future relationship with the EU, and ahead of a Bank of England meeting this week.

InterContinental Hotels, one of the stocks that had declined since the outbreak of the coronavirus, gained 3.1 per cent.

Among smaller stocks, tourism and insurance firm Saga advanced 7.6 per cent after saying it was on track to meet its annual profit outlook, despite a one-off charge related to the collapse of Thomas Cook last year.

London-listed Irish food company Greencore fell 1 per cent as it highlighted the challenging trading environment in an update to investors.

Europe

Luxury goods makers LVMH, Kering and Moncler, all of which derive a chunk of their demand from China, rose after sliding more than 3 per cent on Monday. Bolstered also by a recovery on Wall Street, the Stoxx 600 ended up 0.8 per cent. Along with most other major country indices, the benchmark index had lost more than 2 per cent in the previous session.

Capping gains were shares of Europe’s most valuable technology company SAP, which dropped 2.1 per cent as some analysts pointed to its slowing cloud revenue growth. Philips slipped 2.1 per cent after the Dutch health technology company’s quarterly sales fell short of estimates.

In Germany, the Dax rose 0.9 per cent, while the French Cac 40 finished 1.1 per cent higher.

US

Wall Street rose as gains in technology and financial sectors helped major indexes recover from their worst sell-off in about four months.

Corporate results were mixed, with US industrial giant 3M sliding 5.7 per cent in early trading after it forecast 2020 profit below expectations as it faced sluggish demand in Asia. Pfizer fell 3.9 per cent after the drugmaker reported a lower-than-expected quarterly profit.

Harley-Davidson dropped 3.75 per cent after capping its fifth straight annual US sales drop with quarterly profit that missed estimates.

Shares in Xerox jumped 5.4 per cent after it forecast 2020 profit above Wall Street expectations, while defence giant Lockheed Martin rose after reporting sales that beat analysts’ estimates.

The market also awaited quarterly earnings from companies including Apple and Starbucks. Investors will keep a close watch on Apple’s earnings amid concerns of a disruption in iPhone production in China.

–– Additional reporting: Reuters

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Construction sector under Celtic Tiger levels of pressure – report

The construction sector is under Celtic Tiger levels of pressure and is in danger of overheating, according to a new report from construction consultants Mitchell McDermott.

The report says 30,000 additional construction workers are required if housing targets are to be met.

It says construction output grew by 12% last year, but the number of workers only grew by 4%.

Paul Mitchell, one of the authors of the report, predicted output would increase by a further 10% this year to over €25bn.

“Output is outstripping our already constrained supply chain, and this is a worrying trend going forward. In fact, demand is at levels of constraint similar to the Celtic Tiger, especially in Dublin,” he said.

The report says that, while the number of housing unit completions has gone from around 6,000 in 2018 to 21,500 last year, this is still far below the 34,000 that most commentators say the market requires.

It adds that last year saw a huge surge in the number of planning permissions for apartments, with 19,000 in all.

However, Mr Mitchell points out that construction of many of the units has yet to begin and when it does, they will take another 18-24 months to complete.

According to the report, hotel and office construction are reaching full capacity and while there is still strong demand for student accommodation, the latter is facing viability and affordability issues.

The report also says the market is being stoked by cost inflation, which is rising at 5-6% per year.

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Dublin world’s 17th most congested city – report

A new report shows that Dublin is the 17th most congested city in the world, with motorists spending an average of eight days and 21 hours sitting in peak traffic a year.

The TomTom Traffic Index examines the traffic situation in 416 cities in 57 countries around the world. 

The report showed that congestion has risen across the country, especially in Dublin where waiting times have gone up by 3% in the last year. 

TomTom noted that Dublin’s ten most congested roads include Parnell Road / Grove Road, Dalymount / North Circular Road, Dorset Street Lower, Bothar Mhuirfean, Clanbrassil Street Upper, Drumcondra Road Upper, King Street North / Bolton Street, Church Street / Church Street Upper, Amiens Street and Harold’s Cross Road.

“High congestion levels can indicate strong economic activity, but they also represent lost time, productivity and potential for Dublin’s workers,” said Stephanie Leonard, Traffic Advisor at TomTom. 

“It’s time for traffic to change and, while plans around congestion charges and new cycle lane networks will help the situation, they can’t come soon enough,” she added.

Meanwhile, Cork is ranked 75th in the world for congestion, but TomTom noted that congestion is set to reduce when the city’s northern ring road is finished in 2027.

Limerick is ranked 118th in the world for congestion.

On a global basis, Bengaluru takes the top spot this year with drivers in the southern Indian city expecting to spend an average of 71% extra travel time stuck in traffic. 

Next in the global rankings are Philippine capital, Manila (71%); Bogota in Colombia (68%) – last year’s most congested city – Mumbai (65%) and Pune, in India (59%). 

Moscow takes the lead in Europe (59%) with Istanbul (55%) coming a close second. Kyiv (53%), Bucharest (52%), and Saint Petersburg (49%) make up the rest of the top five. 

Paris (39%), Rome (38%) and London (38%) ranked in at 14th, 15th and 17th respectively. 

In the US, the top five most congested cities are Los Angeles (42%), New York (37%), San Francisco (36%), San Jose (33%) and Seattle (31%).

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Retail sales rebound in December – CSO

The volume of retail sales increased by 5.8% on an annual basis in December compared to annual growth of 1.4% in November, the Central Statistics Office said today.

Today’s figures show that retail sales volumes rose by 3.6% in December from November, with sales of food, beverages and tobacco; and cars showing the largest increase.

Retail Ireland, the Ibec group that represents the retail sector, has welcomed the continued growth in retail sales.

“Retailers had a broadly positive Christmas with sustained growth across most of the major categories,” said Arnold Dillon, Retail Ireland Director. “The volume of sales is growing significantly faster than the value of retail sales, which means consumers are getting more for their money. Intense competition is keeping prices low. This is good news for the consumer, but it makes for tough trading conditions.

“To safeguard jobs in the sector, the next government must tackle key factors driving up retail costs, including rising commercial rates and insurance premiums,” he said.

The CSO noted that Black Friday sales were included in the reporting period, which covered the five weeks from November 24 to December 28. ‘Black Friday’ had been included in the November reporting period in 2018.

The CSO also said that when volatile car sales are excluded, the volume of retail sales increased by 2.8% in December on a monthly basis while they were up 5% when compared with December 2018.

Today’s CSO figures show that sales of food, beverages and tobacco jumped by 11.7% in December while car sales motored 5.3% higher. 

The figures also show other Retail Sales – which include carpets, games and toys, flowers and plants, pet food and jewellery – fell by 10% while sales of books and newspapers and stationery were down 3% last month.

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EU says member states can ban or restrict high-risk suppliers from their 5G networks

EU countries including Ireland can restrict or ban high-risk 5G vendors from core parts of their telecoms networks, according to new EU guidelines published today.

The move is likely to hurt China’s Huawei but unlikely to appease the United States.

The non-binding recommendations, agreed by the bloc’s 28 countries, seek to tackle cyber-security risks at national and EU level, with concerns mainly focused on Huawei, although the guidelines do not identify any particular country or company.

Huawei welcomed the EU’s decision which it said would enable it to continue participating in Europe’s 5G roll-out.

The United States is worried that 5G dominance is a milestone towards Chinese technological supremacy that could define the geopolitics of the 21st century.

The US and the EU are also concerned about Chinese laws that require companies to assist in national intelligence work.

The EU sees 5G as key to boosting economic growth and competing with the United States and China.

Huawei, the world’s biggest producer of telecoms equipment, competes with Sweden’s Ericsson and Finland’s Nokia.

“Today we are equipping EU member states, telecoms operators and users with the tools to build and protect a European infrastructure with the highest security standards so we all fully benefit from the potential that 5G has to offer,” Europe’s industry chief, Thierry Breton, said in a statement.

The guidelines call on EU countries to assess the risk profile of suppliers on a national or EU level and allow them to exclude high risk suppliers for the core infrastructure.

EU governments are also advised to use several 5G providers rather than depend on one company.

The providers should be assessed on technical and non-technical factors including the risk of interference by state-backed companies.

The Commission said it was ready to bolster the bloc’s 5G cyber-security by using trade defence tools against dumping or foreign subsidies.

EU countries have to implement the guidelines by April and report on their progress by June.

The United States wants the bloc to ban Huawei on fears that its gear could be used by China for spying, allegations rejected by the company.

The EU, however, is hoping a collective approach based on a checklist of technical and non-technical risks and targeted measures will take some of the U.S. pressure off.

“This non-biased and fact-based approach towards 5G security allows Europe to have a more secure and faster 5G network,” Huawei Ireland said in a statement.

“We will continue to work with our stakeholders here including the Department of Communications and Comreg to help Ireland take a positive, evidence-based approach to the European Commission’s recommendation.”

The company added that it had been a trusted partner in Ireland for the past 15 years, is part of Ireland’s digital ecosystem and is fully committed to rolling out 5G across Ireland.

Yesterday, Britain opted to allow Huawei to supply equipment for non-sensitive parts of its 5G network rather than bow to US pressure and ban the company completely.

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Mortgage arrears fall again in third quarter – Central Bank

New figures from the Central Bank show that the number of homeowners in arrears for more than three months fell to a nine-year-low of 5.9% in the third quarter from 6% at the end of June. 

The Central Bank also said the decline in the number of home mortgages in arrears for two or more years decreased by 753 accounts in the three months to the end of September. 

Accounts in arrears over 720 days accounted for 45% of all mortgages in arrears at the end of September.

Meanwhile, the number of residential buy-to-let mortgages in arrears over 90 days inched back down in the third quarter after rising unexpectedly to the highest level in more than a year in the previous three month period. 

Buy-to-let loans in arrears fell to 13.9% from 14.9% in the second quarter, the lowest level since the bank began to collect data in 2012. 

Arrears in this category had peaked at 22.1% in 2014 in the aftermath of the property crash.

Today’s Central Bank figures also show that the number of home mortgages classified as restructured at the end of September stood at 88,587. 

A total of 4,993 new restructure arrangements were agreed during the three months from June to September. 

Of these restructured accounts, 86% were deemed to be meeting the terms of their current restructure arrangement.

The Central Bank noted that arrears capitalisation accounted for the largest share of restructured accounts at 33%, while the share of accounts on temporary restructure arrangements remained low at 13%.

In the buy-to-let sector, 14,324 mortgage accounts were categorised as restructured at the end of September, down 1,239 accounts. 

83% of these buy-to-let mortgages were not in arrears, while 88% were meeting the terms of their current
restructure arrangement, the Central Bank said.

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Six euro zone banks fall short of ECB capital demands

Six euro zone banks have fallen short of the European Central Bank’s capital demands and have been told to shore up their balance sheets or face tighter controls. 

The ECB’s annual review of banks comes as many lenders are struggling to make money in an environment of ultra-low interest rates.

They are also facing high legacy costs from their bricks-and-mortar branches and amid a string of scandals related to money laundering. 

The euro zone’s top banking supervisors kept both their mandatory capital requirements and their “guidance”, which is not binding, unchanged from the previous year, at an average 2.1% and 1.5%, respectively. 

Yet six banks fell short of the capital guidance, compared to just one firm last year, and will have to raise their Core Equity Tier 1 ratio (CET1) if they are to avoid new curbs from the supervisor. 

“Six out of the 109 banks that participated in the (evaluation) showed CET1 levels below the Pillar 2 guidance,” the ECB said. 

“For those banks which have not taken satisfactory measures in the last quarter of 2019, remedial actions have been requested within a precise timeline,” it added. 

The ECB’s top supervisor Andrea Enria said he was “broadly satisfied” with the results but emphasised concerns about banks’ business models, internal governance and operational risks.

This was probably a reference to recent money-laundering cases from Latvia to Malta.

The ECB published for the first time a list detailing its capital requirement for each bank, except for a handful that either refused their consent or have yet to be examined in full.

Volkswagen’s leasing arm was a notable absent from that list, along with the euro zone subsidiaries of some investment banks that have only recently left London due to Brexit, among others.

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Oil drops below $60 as China virus stokes demand concern

Crude prices dropped below $60 for the first time in nearly three months today, as the death toll from China’s coronavirus rose and more businesses were forced to shut down, fuelling expectations of slowing oil demand.

Brent crude was down $1.40 a barrel at $59.29 this afternoon to mark its lowest since late October and the biggest intra-day fall since January 8. 

US crude was down $1.05 at $53.14 a barrel. Both contracts had earlier fallen by more than 3%. 

Global stock exchanges also fell as investors grew increasingly anxious about the widening crisis. Demand spiked for safe-haven assets, such as the Japanese yen and gold. 

The death toll from the coronavirus rose to more than 80 and the Chinese government extended the Lunar New Year holiday to February 2, trying to keep as many people as possible at home to prevent the virus from spreading further. 

Saudi Arabia and the United Arab Emirates, allies in the Organization of the Petroleum Exporting Countries (OPEC), tried to play down the impact of the virus today.

Riyadh, the de-facto OPEC leader, said the group could respond to any changes in demand. 

An OPEC source said there were “preliminary discussions”among OPEC+ for an extension of the current oil supply cuts beyond March, and a possible deeper cut was also an option, if there was a need, and if the China virus spread impacted oil demand. 

Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman Al-Saud said today he felt confident the new virus would be contained. 

Markets are being “primarily driven by psychological factors and extremely negative expectations adopted by some market participants despite (the virus’) very limited impact on globaloil demand,” the minister said. 

“Such extreme pessimism occurred back in 2003 during the SARS outbreak, though it did not cause a significant reduction in oil demand,” Prince Abdulaziz said in a statement. 

The OPEC+ group has been withholding supply to support oil prices for nearly three years and on January 1 increased an agreed output reduction by 500,000 barrels per day (bpd) to 1.7 million bpd up to March. 

OPEC+ “have the capability and flexibility needed to respond to any developments, by taking the necessary actions to support oil market stability, if the situation so requires,” Prince Abdulaziz said. 

Brent crude oil prices have dropped by almost a fifth since a spike in tensions between the US and Iran briefly lifted prices above $70 a barrel on January 8. 

The losses since are in spite of a 75% drop in output from Libya to less than 300,000 bpd due to an ongoing blockade of oilfields. 

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Temporary trade dispute appeal system agreed at Davos

The European Union, China and 15 other countries agreed today to develop a temporary system for appealing trade dispute rulings after the recent US-provoked collapse of the WTO appeals body. 

Ministers from the group published a joint statement announcing a “multi-party interim appeal arrangement”. 

The arrangement was reached during a meeting at the World Economic Forum in Davos.

It will allow all the participating parties to “preserve a functioning and two-step dispute settlement system at the WTO in disputes among them,” the EU explained in a statement.  

The move came after the WTO appeals panel, sometimes dubbed the supreme court of world trade, halted its operations last month after years of relentless US opposition. 

Washington, which accuses the court of serious overreach, has blocked the appointment of new judges, leaving it without the quorum of three needed to hear cases due to mandatory retirements.  

Ahead of the December 11 shutdown, Canada and the EU struck a bilateral deal last July to set up an interim panel to hear appeals in disputes that might arise between Brussels and Ottawa. 

In Davos, they were joined by more than a dozen other countries: Australia, Brazil, China, Colombia, Costa Rica, Guatemala, South Korea, Mexico, New Zealand, Norway, Panama, Singapore, Switzerland and Uruguay.

The countries stressed that the arrangement was temporary, and that it was open to any WTO member willing to join it. 

“This remains a contingency measure needed because of the paralysis of the WTO Appellate Body,” European Trade Commissioner Phil Hogan said in a statement.

“We will continue our efforts to seek a lasting solution to the Appellate Body impasse, including through necessary reforms and improvements,” he said. 

The system, which the countries argue is designed to preserve the principle enshrined in international trade law that governments have the right to appeal in any dispute, is based on Article 25, a rarely-used provision of the WTO Dispute Settlement Understanding. 

The article, used only once before in a 2001 dispute between the US and EU over music rights, allows WTO members to resolve disputes via external arbitration and to agree amongst themselves on the rules of procedure and choice of judges. 

The announcement came after US President Donald Trump earlier this week in Davos said “very dramatic” action to reform the WTO was in the works. 

The US has wide-ranging concerns about the WTO appellate branch, which predate Trump’s presidency. 

His predecessor Barack Obama’s administration began a policy of blocking the appointment of appeals judges over concerns that their rulings violated American interests. 

But Trump’s trade team has both extended that policy and escalated the fight, arguing in particular that the US Constitution does not permit a foreign court to supersede an American one. 

US concerns regarding the WTO appeals court include allegations of judicial overreach, delays in rendering decisions and bloated judges’ salaries. 

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