March 27, 2012 ? 3:08 am
European Central Bank boss Mario Draghi says there are signs of ?stabilisation? in financial markets and the wider eurozone economy, and defended the ECB?s cheap loans to banks.
Draghi: ?doomsday predictions were exaggerated? UK in talks with Abu Dhabi over RBS (LSE: RBS.L ? news ) stake sale Bernanke says US jobs market ?far from normal? Ireland (Xetra: A0Q8L3 ? news ) to name date for EU treaty referendum Surprise rise in German business sentiment
= Latest =
22.49 That?s it for our Live Blog for today. We? be back tomorrow with the latest on the eurozone debt crisis. Don?t forget to check out our Finance page for the latest business news.
21.48 David Miles , the MPC (KOSDAQ: 050540.KQ ? news ) member, has said that unused capacity in the British economy will continue to keep inflationary pressures down, justifying the Bank of England?s recent loosening.
In his speech at the National Association for Business Economics conference in the US, Miles added that the Bank of England, Federal Reserve and European Central Bank all increased their balance sheets to fight the crisis: ?All three remain committed to maintaining price stability in their economies.?
21.35 The US nomination for the head of the World Bank, Jim Yong Kim , is to travel to China, Japan (EUREX: FMJP.EX ? news ) , Brazil, Mexico, Ethiopia and India to solicit ideas for the institution, the Treasury Department said. The trip will begin on March 27 and run through to April 9.
21.24 A French court has placed former IMF (Berlin: MXG1.BE ? news ) chief Dominique Strauss-Kahn under formal investigation on suspicion of complicity in pimping operation, says his lawyer.
21.15 Willem Buiter at Citigroup (NYSE: C ? news ) expects the euro crisis to flare up again, but doesn?t see a break-up. He adds that a Greece exit is possible, could be a 50pc chance.
21.00 The US markets have closed. The Dow rose 162.19 ? 1.2pc ? to 13,242.92; the SP 500 (SNP: ^GSPC ? news ) climbed 19.42 ? 1.4pc ? to 1,416.53; and the Nasdaq (Nasdaq: ^NDX ? news ) added 54.65 ? 1.8pc ? to 3,122.57.
US stocks surged Monday following gains on European markets rising and after Ben Bernanke said a still-weak job market merited the Federal Reserve keeping easy money policy in place.
20.20 Mario Monti is facing similar problems in Italy that Mariano Rajoy is experiencing in Spain (see 19.20 post).
The prime minister ? brought in to restore order to the country?s finances and confidence in its political system following the departure last summer of the scandal-hit Silvio Berlusconi ? said tonight he would not cling on to power if unions and fellow poiticians reject his economic reform plans.
That puts the pressure on his centre-left supporters in parliament, who oppose his plans to make it easier for companies to fire workers, thereby energising the jobs market, but who also don?t want to see Mr Monti forced out and replaced by a right-wing politician.
Mr Monti said in Seoul, where he was attending a nuclear conference:
The objective is a lot more ambitious than just staying there. It?s trying to do a good job.
If the country, through its labour organisations and political parties, does not feel ready for what we consider a good job, we would certainly not seek to keep going just to reach a particular date.
19.55 US markets are still trading higher, following Fed chairman Ben Bernanke ?s remarks that it was too early to tighten up stimulus measures such as low interest rates and QE because the recovery in the US obs market is still fragile.
The Dow Jones was up 1.1pc to 13,218 points and the SP 500 climbed 1.2pc higher at 1,413 in afternoon trading.
19.20 Spain?s new prime minister Mariano Rajoy is already feeling the pressure in the polls , as he has to push through very unpopular spending cuts to balance the country?s books.
His PP party failed to win a majority in a key regional election in the state of Andalucia. Louise Armitstead reports:
Traders were alarmed by signs that Mariano Rajoy was losing popular support for his programme to reduce Spain?s burgeoning debts, without which the country may need a Greek-style bail-out.
The prime minister?s PP party won 50 seats in the crucial Andalusia elections but failed to win a majority as the opposition leftist PSOE party won 47 seats.
Alastair Newton, political analyst at Nomura, said: ?Failure to win in Andalusia, whose regional deficit was more than double its 1.3pc of Spanish GDP target for 2011 and which voted against the central government?s 1.5pc target for this year, represents a potentially serious setback in efforts to rein in the total national deficit to 5.3pc.?
He added: ?The outcome in Andalusia may also make the challenges PP faces at the national level even more daunting.?
18.40 Telegraph commentator Jeremy Warner has had a go at looking on the bright side for the economy , and found several pieces of evidence to back the case for optimism (with some heavy caveats of course.) He writes:
The evidence of real momentum in the US economy builds by the month. It?s hard to stop a supertanker once it?s shifting again.
According to a recent report by McKinsey Global Institute, private sector deleveraging in the US may already be largely over. There?s a wall of pent-up demand waiting to break free; business investment decisions long delayed by a seemingly perpetual crisis can wait no longer.
Some of the same pent-up business demand may be about to hit the UK economy. That, in any case, is what the Office for Budget Responsibility is banking on in forecasting 2pc growth next year.
And while the scale of the household deleveraging challenge still looks daunting, a gradual pick-up in real income growth should of its own accord do much of the remaining work. Further deleveraging doesn?t have to mean a continuation of the consumer recession.
18.25 Fuel tanker drivers in the UK who are members of the Unite trade union have voted to strike over their pay and conditions.
John Cridland, director-general of business lobby group the CBI, said strike action could derail the fragile eocnomic recovery:
This vote should disappoint us all. Disruption is in nobody?s interest at this critical moment in the recovery.
Our roads are vital for the health of our economy, delivering 83pc of all goods in the UK, and 70pc of employees to work.
Drivers have voted for a strike, but each employer and Unite should now get back around the table to discuss the issues raised. Going ahead with strike action would have a real impact on people across the country.
18.20 Mario Draghi, head of the European Central Bank , is speaking at the annual reception of the Association of German Banks (no jokes ? it?s bound to be a better night out than the Association of Greek Banks?).
He says he has seen ?signs of stabilisation in both financial markets and over all economic activity ? albeit still at low levels.?
He also defends the banks?s successful policy of offering cheap short term loans (known as LTROs) to eurozone banks, which has seen a great recovery in European sovereign debt markets since Christmas.
He says it wasn?t designed to help debt markets (although that?s what it has achieved), an idea the Germans weren?t very keen on back in December, as dedicated debt crisis followers will recall. Via the ECB?s Twitter feed:
Twitter: Eur. Central Bank (Other OTC: CBSU.PK ? news ) ? Mario Draghi: LTRO?s not to support sovereign debt markets or bolster bank profits but to prevent a credit crunch
18.00 An update on the Royal Bank of Scotland story below:
The Treasury has now responded and played down the report. He said:
The aim is to repair and return RBS to full health so that it is able to support the UK economy in the future, and the current strategy is working to achieve that.
The Government?s policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.
The UK government has held talks with Abu Dhabi about selling part of its 82pc stake in RBS to the emirate. However, sources indicated discussions about a sale are not ?advanced?, as the BBC report earlier today suggested.
The deal would be for a sale of at least 10pc and as much as a third of the Government?s stake in the bank, according to the BBC.
17.10 BREAKING?
The BBC is reporting that the Government is in advanced talks to sell a ?significant? part of its 82pc stake in Royal Bank of Scotland to Abu Dhabi.
16.50 European shares have ended the day higher, helped by good economic news from Germany and comments from the Fed chairman Ben Brenanke which suggested the US won?t be hiking interest rates and turning off the quantitative easing taps just yet.
The FTSE 100 closed up 0.8pc at 5,902 points, while the CAC (Frankfurt: 924169 ? news ) added 0.7pc in Paris and the German DAX added 1.2pc.
16.05 Slightly surprising admission from the OBR ? they use the bookmaker William Hill (Other OTC: WIMHF.PK ? news ) to gage the probability of disasters such as Greece leaving the eurozone. Louise Armitstead tweets:
Twitter: Louise Armitstead ? MP surprise re OBR use of bookies. Nickell insists ?v useful? to get view of ppl ?putting money where their mouth is.?
15.35 The influential Treasury Select Commitee is today hearing evidence from the Office for Budget Responsibility , as part of its scrutiny of last week?s Budget.
The independent forecasts of the OBR form part of the cornerstone of the government?s tax and spending plans.
Louise Armitstead is listening in to Robert Chote, head of the OBR, who is answering the MPs (BSE: MPSLTD.BO ? news ) questions now. She (SNP: ^SHEY ? news ) tweets:
Twitter: Louise Armitstead ? #Chote : OBR ensures Chancellor is ?not marking his own prep? tho he admits setting output gap is ?has element of arts as well as science.?
15.05 The real Angela Merkel is on the BBC?s Newsnight tonight (see 08.15 post for details), but the marvellous spoof Angela Merkel on Twitter ( @Angela_D_Merkel ) manages to hit the nail on the head more often that not:
Twitter: Angela Merkel ? Eurozone leaders conference call. Agreed to take all necessary steps to defend the viability of our summer holidays. #clubmed
14.45 gold prices have got a boost from Fed chairman Ben Bernanke ?s comments earlier this afternoon ? his remarks that the US economy must grow faster to get more people back into work were interpreted by some as meaning a further round of quantitative easing could be on the cards.
The spot gold price climbed 1.1pc to $1,680.06 in early afternoon trading, and reached as high as $1,683.79.
The dollar fell against the euro and the Swiss france after the comments, because a futher round of QE would drive down the value of the US currency.
14.20 Ireland is expected to name the date for its referendum on the new EU treaty on closer fiscal union.
Given Ireland?s history of saying No in referendums on EU matters, the public vote will be closely watched.
Ireland is also likely to be the only country out of the 24 who signed up to hold a referendum on the plans for closer fiscal union.
Eurosceptics demonstrate after the results of the 2008 Irish referendum on the Lisbon treaty at the European Parliament in Strasbourg.
14.10 More comments from Fed chairman Ben Bernanke ? he says that wage rises do not pose an inflationary threat to the US economy ? because pay increases are still minimal and unlikely to shoot up. He said:
Wages are not a major concern for inflation. We still need to be concerned about commodity prices and other factors but wages at this point remain quite subdued.
The slow rate of wage growth is probably consistent with the relatively weak labor market and a high degree of cyclical unemployment.
13.18 SP is worried about the effect of a fall in the oil price on Russia.
Twitter: Amy Resnick ? RT @bored2tears : SP warns it may cut #Russia ?s rating up to three notches if #oil suffers sustained fall. #BRICS
SP says in a report Hooked On Oil: Russia?s Vulnerability To Oil Prices that a sustained fall in the price of oil could damage the Russian economy and public finances. Credit analyst Kai Stukenbrock said:
We estimate that a $10 decline in oil prices will directly and indirectly lead to a 1.4pc of GDP decline in government revenues. In a severe stress scenario, where a barrel of Urals oil drops to, and stays at, an average $60, we would expect the general government to post a deficit above 8% of GDP. In that scenario, the long-term ratings on the Russian Federation could drop by up to three notches.
13.13 The dollar trimmed gains against the yen and ceded ground against the euro after Fed chairman Ben Bernanke said the US labour market was ?far from normal? despite recent improvement.
He says the economy will have to grow at a much faster rate to create enough jobs to reduce unemployment.
European shares also extended gains after the comment, with one trader asking: ?QE3 here I come??.
12.53 Federal Reserve chairman Ben Bernanke gives a speech to a conference in Washington DC at 1pm UK time. Richard Blackden , our New York correspondent, says it could be newsworthy if he hints for or against QE3.
Analysts are watching particularly keenly for any sign the Fed may be considering pulling forward from late 2014 the timing of reversing ultra-low interest rates in light of surprisingly good signs about the recovery.
12.04 Domingo Cavallo, who was unable to avoid Argentina?s $95bn debt default in 2001, told Bloomberg that bondholders are overestimating the risks of further losses on the country?s debt or that it wll leave the euro. He says its exit from the eurozone would cost the single currency block more than allowing it to remain in the euro and propping it up with more funds.
11.30 Game Group , the struggling computer game retailer, has become the latest casualty on the High Street (BSE: HIGHSTREE.BO ? news ) . It has appointed PwC as administrator after talks with lenders ended without resolution, putting 6,000 jobs at risk.
Mike Jervis , joint administrator and partner at PwC, said:
The group has faced serious cashflow and profit issues over the recent past. It also has suffered from high fixed costs, an ambitious international roll-out and fluctuating working capital requirements.
Despite these challenges, we believe that there is room for a specialist game retailer in the territories in which it operates, including its biggest one ? the UK. As a result we are hopeful that a going-concern sale of the business is achievable.
Dr Jim Yong Kim with US President Barack Obama
11.02 Barack Obama?s attempts to keep an American at the top of the World Bank is running into interference. Not China has added its voice to those from emerging markets demanding change.
He put forward health expert Dr Jim Yong Kim on Friday as a candidate on a shortlist that includes Nigerian Finance Minister Ngozi Okonjo-Iweala and Jose Antonio Ocampo , a former Colombian finance minister.
Foreign ministry spokesman Hong Lei said on Monday:
The head of the World Bank and other international financial institutions should be selected based on the principles of fairness, openness and transparency. We should also heed the voice of developing countries so as to ensure the voice and representation of developing countries in the World Bank and other international financial institutions.
10.36 I?m not sure if this is good new or not. The ONS say that one third of babies born this year in Britain are expected to survive to celebrate their 100th birthday.
A higher percentage of baby girls are expected to reach 100 than baby boys ? 39pc and 32pc respectively. At every age, females have more chance of reaching their 100th birthdays than males do.
Let?s hope the eurozone crisis doesn?t drag on that long.
10.25 Italy has also received some unexpected good news. Consumer morale in March has risen to its highest level since July, boosted especially by improving sentiment on family finances. Mario Monti, the Italian PM, will take some encouragement as consumer spending in Italy has been among the most sluggish in the eurozone for a decade.
Javier Arenas (centre), leader of the Popular Party in Andalusia, celebrates after winning the presidency of the autonomous region. Photo: AFP
10.05 Stock markets in Europe (Chicago Options: ^REURUSD ? news ) have weakened and a largely flat. The FTSE 100 is up just 0.1pc, Germany?s DAX (Xetra: ^GDAXI ? news ) and France?s CAC are both down 0.03pc. Worries about Spain have hit the Ibex , which has fallen 1.7pc, after an election result that could hamper the ruling party?s austerity plans.
Spain?s centre-right People?s Party failed to secure an outright majority in a regional election in Andalucia, missing out on the chance of a psychological boost for Prime Minister Mariano Rajoy ?s looming austerity budget. A solid win would have put the PP in control of 12 of 17 autonomous regions and strengthened Rajoy?s hand before a general strike on Thursday and his presentation of a tough 2012 budget on Friday.
Left-leaning newspaper El Pais said in an editorial:
A day after the polls, the PP is still the dominant power in Spain ? but electorally it is starting to suffer the effects of the (economic) situation it has to deal with.
09.30 Carsten Brzeski , economist at ING in Brussels, said:
German Ifo: is the sky the limit? The strong labour market, filled order books and low inventories still bode well for growth in the coming months, albeit at a low level.
Today?s unexpected rise in sentiment follows data last week that showed the first contraction in German manufacturing this year. But not all the comments are upbeat.
Ifo president Hans-Werner Sinn said the data showed that the German economy ?is losing some of its momentum.?
The improvement in expectations was smaller and the business situation did not show any further improvement.
Ifo calculates its headline index on the basis of companies? assessments of their current business and the outlook for the next six months. And while the outlook sub-index rose to 102.7 points in March from 102.4 points in February, the sub-index measuring current business was unchanged at 117.4 points.
09.10 Here are a few other lines from Ifo economist Klaus Wohlrabe :
ECB Interest rates are appropriate Survey shows Germany can avoid mini-recession Firms are getting used to the eurozone debt crisis
09.05 German business sentiment rose unexpectedly for the fifth month in a row in March in a sign that Europe?s largest economy continues to perform strongly despite the woes of other eurozone members.
The Munich-based Ifo think tank said its business climate index, based on a monthly survey of some 7,000 companies, rose to 109.8 in March from a revised reported 109.7 in February. Most analysts had expected it to remain steady.
Ifo economist Klaus Wohlrabe said an increase in retail sales was the main reason for the improvement. He said:
Inflation and oil prices are not a big danger at the moment for firms, but do pose a potential risk .
Greek 10-year bond yields have jumped from around 17.6pc to 19.5pc since last Thursday. Graph: Bloomberg
08.40 Bond yields on new Greek bonds have spiked over fears that the market for credit default swaps, an insurance against default, has shut, the Financial Times reports.
The concern is focused on 60-day look-back clauses in standard CDS (SNP: ^CDSY ? news ) contracts, which could be used to activate a payout on new contracts following the declaration of a ?credit event? on March 9, when Greece secured a bond deal with private investors.
Traders claim that is investors can?t buy insurance against default, they will stop buying Greek debt. Bankers want the International Swaps and Derivatives Association to rule on look back clauses.
08.15 Angela Merkel , in an interview to be broadcast on BBC?s Newsnight tonight (speaking via a translator), says it would be ?catastrophic? to allow Greece to leave the eurozone because of its debt problems.
She said Athens had a ?long and arduous road? to recovery but it would be a ?huge political mistake to allow Greece to leave? the single European currency.
We have taken the decision to be in a currency union. This is not only a monetary decision it is a political one. It would be catastrophic if we were to say (to) one of those who have decided to be with us, ?We no longer want you.?
Incidentally the (European Union) treaties don?t allow for that anyway. People all over the world would ask, ?Who will be next?? The Euro area would be incredibly weakened.
In the interview she also reiterates her support for Britain?s strong presence in the EU, despite Prime Minister David Cameron?s move to block a new fiscal pact in December.
Britain needs to know that we in Germany want a strong Britain in the EU, we always have and we always will.
08.01 The FTSE 100 has opened up 0.3pc at 5875.70. Financials (Euronext: IXEFI.NX ? news ) and mining stocks were among the biggest risers, with Randgold up 1.7pc, Barclays (LSE: BARC.L ? news ) rising 1.4pc and Aberdeen Asset Management gaining 1.5pc. ICAP (LSE: IAP.L ? news ) , Pearson (EUREX: PSOF.EX ? news ) and BA-owner IAG are among the biggest fallers, down between 0.2pc and 0.4pc.
07.55 Jonathan Russell, Daily Telegraph Assistant City Editor, reports in our City Briefing that there is still some work to be done on last week?s Budget. The Treasury Select Committee will hear from Office for Budget Responsibility chairman Robert Chote later on his predictions for national growth.
The OBR increased its forecast slightly last week from 0.7pc to 0.8pc.
07.35 There is still pressure in the European Central Bank to end emergency measures. Benoit Coeure, a member of the central bank?s executive board, said in a speech prepared for Barclays? European Conference to be held in Tokyo on Monday:
A timely exit from non-standard measures and a return to a less accommodative policy stance ? once the economic conditions are ripe ? are essential ?
First (OTC BB: FSTC.OB ? news ) , because monetary policy accommodation for prolonged periods of time might fuel excessive risk-taking, leverage and asset price bubbles.
Second, it might discourage banks, companies and governments from strengthening their balance sheets and therefore create a dependence on low rates.
German 10-year bond yields edged up 2 basis points to 1.879pc on Monday. Graph: Bloomberg
07.30 German Bund futures inched up at the open with traders bracing for softer German business sentiment data laster this morning after weak manufacturing figures last week renewed growth worries about Europe?s biggest economy. The German Ifo survey is forecast to reveal business morale was unchanged in March from last month?s 109.6, but traders said that expectation may have softened after the weak PMI data.
07.20 Wolfgang Mnchau , the FT columnist , is not convinced by Mario Draghi?s declaration last week the the eurozone debt crisis in ?over?. He writes in an article headlined Europe?s bailout bazooka is proving a toy gun :
Welcome back to the crisis. And it?s set to get worse once the markets discover that the eurozone is about to fudge the increase in the European rescue umbrella.
He argues that without joint liability of eurozone countries on all claims to rescue funds, ?then you have to accept there is simply no backstop for Spain?.
07.18 Asian stock markets drifted in lacklustre trading as investors evaluated the prospects of a global slowdown after reports of cooling demand in China and poor economic data in the eurozone last week.
Japan?s Nikkei 225 (Osaka: ^N225 ? news ) rose 0.07pc to 10,018.24, Hong Kong?s Hang Seng (HKSE: ^HSI ? news ) dipped 0.02pc, South Korea?s Kospi fell 0.3pc,Australia?s SP ASX (Other OTC: ATKEF.PK ? news ) /200 lost 0.2p.
However, European markets are expected to rise at the open as investors look for bargains following a week-long sell-off, although concerns over the outlook for the global economy could limit the gains. London?s FTSE 100 (Euronext: VFTSE.NX ? news ) is expected to open up 0.3pc, Germany?s DAX 0.5pc and France?s CAC 0.5pc.
Protesters scuffle with riot police during a student parade in the northern port city of Thessaloniki, Greece. Photo: AP
07.15 Concerns over the eurozone debt crisis may have moved to Spain, bun tensions in Greece continue to simmer. On Sunday Greek police fired tear gas to disperse anti-austerity protesters at national day parades to mark Greece?s independence from Ottoman rule in three cities.
The annual military parade to commemorate Greece?s uprising in 1821 was held under unprecedented security measures in Athens, preventing a repeat of minor clashes and heckling at previous celebrations, when protesters called President Karolos Papoulias a traitor.
In Athens, streets were cordoned off and about 4,000 police officers were deployed to the city centre, including snipers on the roof of parliament and other buildings on the main Syntagma square, the scene of violent anti-austerity protests last year.
07.12 Finland?s prime minister, Jyrki Katainen said:
The firewall must be high enough, but not too high, which could destroy the confidence of the sustainable countries.
?while on Saturday, EU Commissioner for Economic Affairs, Olli Rehn , urged Spain to meet its budget obligations or face sanctions on the financial markets.
The remarks were made at what Finland?s ministry for foreign affairs called an ? Informal Lapland meeting on economic affairs ?. This relaxing-by-the-fireplace-in-pastel-coloured-jumpers shot demonstrates just how informal:
(L-R) Finnish Minister of Foreign Trade Alexander Stubb, Spanish Secretary of State for the European Union Inigo Mendez de Vigo, Prime Minister of Latvia Valdis Dombrovskis, Finnish Prime Minister Jyrki Katainen, Vice-President of the European Commission Olli Rehn and WTO Director General Pascal Lamy meet the media on the last day of the informal Lapland meeting on economic affairs in Saariselka, Inari.
07.05 Germany ?must let bailout fund grow? . That was the message from the head of the eurozone?s temporary bailout fund yesterday. Louise Armitstead reports:
Klaus Regling, head of the European Financial Stability Facility (EFSF), warned that the eurozone must reinforce its firewalls to avoid more market volatility. ?More money would reassure markets. Wrongly or rightly the fact is that big numbers in the shop window create calm,? he said over the weekend.
Mario Monti, the Italian prime minister, told a conference that the rise in Spain?s borrowing costs was a warning that ?it doesn?t take much to recreate risks of contagion?.
Last night, officials claimed Angela Merkel was prepared to yield to the pressure and agree to combine the firepower of the 440bn (368bn) EFSF and its permanent replacement, the 500bn European Stability Mechanism (ESM).
However, the German Chancellor is desperate not to anger her electorate by giving more support to the eurozone, especially after her coalition partners struggled in state elections yesterday.
07.00 Welcome to our live coverage of the European debt crisis.
Debt crisis live: archive
Tags: Debt
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Source: http://freedom-debtrelief.org/debt-debt-crisis-as-it-happened-march-26-2012/
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Public release date: 28-Mar-2012
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