All eyes on EU Leaders summit

28 Jun 2018

All eyes on EU Leaders summit

EU leaders are expected to arrive at the European Council in Brussels at 13.30 today for the much anticipated June summit.

As for today’s agenda the breakdown of events will begin with an exchange of views with the President of the European Parliament at 15.00, which will be followed shortly after by a roundtable working session at 15.30 – this is set to take up most of Thursday's proceedings. Today's summit will end at 19.00 with a press conference. In terms of today’s topics, key discussion areas will focus on migration, security and defence and economic and financial affairs. On migration, leaders are expected to underline the need for a comprehensive approach to migration and the importance of effective control at the EU’s external borders. Discussions on the economy and finance will revolve around recent issues debated under the Leaders’ Agenda such as digital taxation, tax avoidance and evasion. Trade will also be a key talking point in light of recent global and intensifying trade tensions. The summit’s main event, Brexit, will be addressed on Friday 29 June.
 

Bank of England Financial Stability Report
 

Yesterday morning the Bank of England published its latest Financial Stability Report (FSR). In terms of policy the most notable point is that the BoE held fire on the Countercyclical Capital Buffer, holding it steady at 1%, despite its previous suggestions that it could be increased in H1 2018. With regard to financial stability risks, the BoE’s assessment is that domestic risk remains at a standard level, with the main risk, unsurprising being Brexit, although it does go on to state that UK banks could withstand a ‘disorderly Brexit’. Whilst UK domestic risks are deemed standard, the FSR does point to material and increasing global risks, notably in the form of US corporate debt, trade tensions, emerging markets and China.
 

German Consumer climate remains stable
 

German consumer sentiment has remained stable in July, However, concerns were raised of the escalating trade conflict between the EU and the USA, which is leaving its mark on consumer mood.


According to Gfk press release ‘The route taken by the US President Donald Trump in terms of the trade policy towards the EU is causing concern, especially where economic expectations are concerned. These suffered clear losses. In contrast, the income expectations and propensity to buy are managing to hold up, even making slight gains in June. The consumer climate remains stable as a result’. GfK's forward-looking consumer confidence index came in at 10.7 points in July, unchanged from June.
 

Chr Hansen: Q318 results, FY18 guidance unchanged
 

Chr. Hansen issued Q318A numbers this morning. The company reported a 4.5% increase in FD EPS to €0.46 from a 2.9% increase in operating profit to €84.0m and 1.5% increase in revenue (2.0% LFL) to €282.7m. In its Q218 results release management guided FY18E organic revenue growth in the 8-10% range with an EBIT margin of around 28.9%. This has been reaffirmed. The company announced an extraordinary dividend of DKK5.94 per share. On a divisional basis, Cultures & Enzymes (C&E) grew EBIT by 1.2% to €57.5m from a 2.4% increase in revenue to €165.9m. The division recorded 11% organic revenue growth. Health & Nutrition reported a 9.6% increase in EBIT to €18.2m from a 1.0% increase in revenue (7% LFL) to €59.1m. The Natural Colors division reported a 1.2% increase in EBIT to €8.3m from an 0.3% decline in revenue (6% LFL) to €57.7m. C&E accounted for 68.5% of Q318A EBIT.
 

Irish Economy: Underlying retail sales increase in May
 

The latest retail sales data, for May 2018, were released yesterday. At a headline level they show strong annual growth (+4.3% and +3.7% in volume and value terms respectively), despite a seemingly tepid performance in the month itself (volumes +0.1% m/m, value of sales -0.4% m/m). However, core (ex-auto) sales show a stronger monthly outturn, with increases of c. 1.5% m/m in both volume and value terms (+4.7% y/y and +3.5% y/y respectively). Data for the different segments of the retail sector show a mixed performance in the month, with six of the 13 segments posting monthly declines in volume terms, while seven saw a monthly drop in the value of sales. This outturn is likely due to tough comparatives, as April’s sales performance was flattered by the recovery in consumer spending after the disruptions to commercial activity produced by the adverse weather seen in late February and early March. On an annual basis, the outturn is more in line with what you’d expect in an economy where employment and earnings are both growing at a strong clip – 11 of the 13 segments in the retail sector posted annual growth in value terms of between 1.8% and 10.5%, while 12 of the 13 segments saw annual growth in volume terms. Staying with the annual performance, we note strong performances from some of the consumer discretionary segments, with Hardware, Paints & Glass +10.5% y/y, ‘Other Retail Sales’ +7.1% y/y and Furniture & Lighting +3.3% y/y, all in value terms.
 

Cairn Homes: Hanover Quay sells for €101m
 

Cairn Homes this morning announced that it has agreed the sale of its apartment development at Six Hanover Quay for a total consideration of €101m (€89m excl. VAT) with a legal completion scheduled for Q1 2019. The development contains 120 apartments and 6,400 sq. ft. of ground floor retail space and the price attained is equivalent to approximately €705k per apartment and €4.4m for the retail space on a VAT-exclusive basis. An SPV managed by Carysfort Capital is the purchaser.
 

Irish Banks: Mortgage approvals data show decent rebound in activity in May
 

Banking and Payments Federation of Ireland (BPFI) mortgage approvals data for May, released this morning, show a continuation of the decent level of activity seen in April, both of these strong months coming after the soft, holiday and weather impacted, Q1 figures. Approvals of €1.01bn in new mortgage applications in May show an +14.5% y/y increase for the month, and is over 42% higher than average monthly figure of €714m seen in Q1. In total, it brings the year-to-date value of approvals to €4.0bn, a 12% increase on the same period last year. The 12 month running total is now at €9.73bn, having registered at €9.3bn for FY17. The total number of approved applications (volume) in May was 4,473 which is +9.9% vs May 2017, while the average value of approved mortgages in May was €226k, a 4.2% increase vs May 2017. Year-to-date, total approved applications are +6.2% vs the same period last year, while the average value of approvals was +5.7% for the same period, indicating that the increase in total approvals value continues to be split roughly 50/50 between additional buyers and an increase in house prices, though this is a more balanced mix than in 2015-2017 when most (60-70%) of the increase in total demand was led by an increase in additional buyers. First time buyer applications year-to-date continue to make up roughly half (49.4%) of all applications by both value and volume. Switchers make up c.13% of applications by both value and volume year-to-date, with this cohort of borrowers continuing to rise in importance compared to previous years (FY17 9%).
 

Economic Releases
 

All day EZ EU Leaders Summit

10.00 EZ Consumer Confidence

13.00 GE German CPI

13.30 US Jobless Claims

13.30 US GDP

14.30 UK BoE MPC Member Haldane Speaks

15.45 US FOMC Member Bullard Speaks

17.00 US FOMC Member Bostic Speaks