YP75: Eurozone bail-out fails to ease investors' fears for the future

Markets started the week strongly as risk assets and the euro rallied following the announcement of a larger than expected Eurozone bail-out package. However, anxiety among investors began to creep back in as concerns arose over the likely effectiveness of the package both in the short term and further down the line.
By The Newsroom
Published 18th May 2010, 13:01 BST
Updated 18th May 2010, 13:01 BST

While the package should be enough to cover the financing needs of many of the countries in question until March 2012, some experts are comparing the bailout to "putting a sticking plaster on a gaping wound".

Markets did however react broadly positive to the news of a coalition government being formed between the Conservatives and Liberal Democrats, which saw David Cameron take his place at No.10. The new government now has the unenviable task of tackling the UK's significant fiscal deficit, and only time will tell whether investor fears over the state of the UK's public finances will be calmed.

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SIG, the European insulation supplier, has disappointingly seen sales struggle since the start of the year. The Sheffield-based company reported a 6 per cent deficit in sales for the period of January 1-May 12, when compared with same period in 2009. The group has suffered from unfavourable weather conditions in the UK and Europe in recent months, but underlying trading in the first quarter was reported to be in line with management's expectations.

Despite the difficult trading conditions, the company has managed to significantly reduce its net debt levels and continues to focus on its working capital management programmes that are proving fruitful.

On the other hand, trading has been more positive for UK lender International Personal Finance. The Leeds-based company, which focuses on emerging markets providing small sum short-term unsecured loans, has announced that trading in April was ahead of management expectations.

The improvement in trading can be attributed to an increase in debt collections, together with a reduction in bad debts throughout central Europe and Poland.

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Having overcome adverse weather conditions in the first few months of the year, the outlook appears more positive with the company reporting it can now potentially access the public debt markets.

As the preparations for the 2012 London Olympics continue to gather momentum, one company which has started to see the benefits is the concrete paving and stone manufacturer, Marshalls. The company has struggled during the downturn but an increase in demand for its products will surely please the management team.

In addition, the company announced that commercial contracts, which were previously put on hold, have started to pick up again.

Despite the good news, the company remains cautious over the short-term outlook having also reported that revenue for the four months to the end of April was the same as last year.

Edward Marsden, Assistant Investment Manager at Brewin Dolphin, Leeds

Related topics:David CameronLiberal DemocratsLeeds