December 21 2012

In the broadcast today: USD and JPY New Trading Week Outlook. With a sequence of notable U.S. and Japanese economic reports scheduled for release in the Christmas holiday-shortened week ahead, we focus on the USD and the JPY and explore the outlook for the two currency majors, we list the Top 10 spotlight economic events that will move the markets next week, we examine the consensus forecasts for the upcoming economic data, we analyze the latest trend developments in the USD/JPY currency pair, we take a look at the price correction in the EUR/USD pair, we note the pullback in the GBP/USD currency pair, we highlight the market’s reaction to the German Consumer Confidence, the U.K. GDP, the U.S. Personal Income and Outlays and Consumer Sentiment, we discuss new forecasts from Goldman Sachs, Morgan Stanley and UBS, and prepare for the trading session ahead.

Live Broadcast from 9:00 am to 10:00 am, Eastern Time, Monday – Friday.

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USA 

Unfestive jitters hit investors after Republicans failed to agree on an alternative plan to avoid the fiscal cliff. Stocks drop following the concerns that the fiscal cliff discussions had broken, with time running out for a resolution. German consumer sentiment wanes…



Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Fiscal cliff fears weigh on markets” was written by Dan Milmo, for guardian.co.uk on Friday 21st December 2012 15.01 UTC

3.01pm GMT

US fiscal cliff developments

To follow the latest developments with the fiscal cliff, my colleague Richard Adams is live blogging here.

2.46pm GMT

More on Cyprus.

2.45pm GMT

Monti wins vote of confidence in Italy’s lower house

Mario Monti’s government has won a vote of confidence on the 2013 budget in Italy’s lower house. Final approval is expected later today.

That could trigger Monti’s resignation as prime minister, with much speculation as to his next move. He is reported to be holding a press conference on Sunday, at which no doubt his future plans will be revealed.

2.36pm GMT

Wall Street opens lower

Wall Street has opened and in early trading, the Dow Jones Industrial Average is down around 144 points, following the concerns that the fiscal cliff discussions had broken, with time running out for a resolution.

1.55pm GMT

US data

Ahead of Wall Street’s opening, some US data to digest from @Reuters:

  • US consumer spending up 0.6% in November, biggest rise since August 2009
  • Personal income up 0.6% in November (durable goods orders, up 0.7%)

With that I’m handing over to my colleague Nick Fletcher.

Updated at 2.11pm GMT

1.32pm GMT

Booming world

If you haven’t already seen this, the Guardian’s booming world series went live this week:

http://www.guardian.co.uk/world/series/the-booming-world

Economist Ha-Joon Chang argues today for a more restrained approach to looking at developing world economies. “Asia shouldn’t overexcite people,” he says, arguing that the commodity price boom has given a short-lived boost to these countries.

He makes a strong case for a slowdown in the Chinese economy and says that “rapid growth” in emerging markets is not sustainable. More impressive than the developed world of course, but still not galloping ahead.

Updated at 1.52pm GMT

1.09pm GMT

German consumer sentiment wanes

GfK, the market research group, has reported that German consumer morale has dropped for the fourth consecutive month to its lowest level in more than a year. Its survey of 2,000 Germans showed that consumer sentiment registered a rating of 5.6 heading into January, down from 5.8 in December. The willingness to make purchases has fallen to its lowest level since May 2010.

But Germany’s love for a bargain should keep things ticking over. This Financial Times piece on the German love for Primark is an interesting read. Needs a subscription, mind. Crudely, the eurozone could do with Germany exporting less and consuming a bit more.

1.01pm GMT

Ferrovial confirms Heathrow stake sale

Another tangential guest entry, but Spanish conglomerate Ferrovial – a grandee of European infrastructure – has confirmed the sale of a 10% stake in Heathrow airport to the Qatar sovereign wealth fund. Heathrow’s investment roster is now dominated by the Chinese, Qatari and Singaporean governments. Another sign of the shifting balance in power. Not that it means sovereign wealth funds will be paying for Europe’s new roads and airports. Investors tend to prefer investing in assets after they have been built. So Europe’s taxpayers still need to stump up the cash to get projects started.

Updated at 1.53pm GMT

12.39pm GMT

Diamond exhumed from the rough?

Now this won’t be many people’s idea of a new year resolution, but the resurrection of Bob Diamond’s career could be one of the surprise events of 2013. This piece on Reuters says that while the Libor scandal was bad for Barclays, it was ultimately much worse elsewhere.

Updated at 1.54pm GMT

12.28pm GMT

Fitch and the eurozone

Fitch, the ratings agency, expects the eurozone to “stagnate” in 2013 after contracting 0.5% in 2012. It expects Emerging Europe, which includes the likes of Latvia, to grow by 2.9%, up from 2.3% in 2012.

12.09pm GMT

On a more positive note

With deference to the festive season, we ought to inject some optimism into the fiscal cliff issue. Let’s call it a fiscal ha-ha. The American economy will not implode on 1 January and the tightening will be gradual. One financial professional told Reuters this morning that it was more of a “slope” than a cliff – the latter term was coined by Ben Bernanke at the US Federal Reserve. This piece by the Centre on Budget and Policy Priorities offers a less hyperbolic perspective. Still, it does use the phrase “mild recession”, which is never as reassuring as they would like it to sound.

Updated at 12.19pm GMT

11.56am GMT

Next year and Japan

According to some informed commentary, including Peter Boone and Simon Johnson in the Atlantic Monthly recently, Japan could be the source for the next major financial panic – its gross debt is 236% of GDP and it is underpinned by fallible demographics. The piece is worth reading. Once you have done that, square it with this piece from Business Insider. There is more debate to be had on the Japan scenario, evidently.

Updated at 12.19pm GMT

11.44am GMT

Cyprus talks in January

European finance ministers will discuss the perilous state of Cyprus early next year, says Merkel official.

Updated at 11.44am GMT

11.39am GMT

Shares update

Reuters is reporting widespread selling in most major stock markets and strong demand for safe assets such as German bonds in the wake of the failed Boehner meeting. The FTSEurofirst 300 index of top European stocks fell 0.6% by mid-morning, while the dollar, yen, and US and German government bonds all rose.

Ian Williams, strategist at Peel Hunt, said:

The recent performance of key benchmarks has priced in a satisfactory outcome to the US fiscal discussions, which is far from a done deal.

11.33am GMT

Monti and politics

If the unelected Italian prime minister, Mario Monti, sheds his technocratic cloak and runs in elections next year, it could have a positive impact.

Updated at 11.42am GMT

11.03am GMT

Sequestration impact

If the US does indeed tumble off the fiscal cliff, automatic spending cuts kick in and will take $109bn per year from the federal budget – annually – over the next 10 years. Of that total, $54.7bn will come from defence and that could have an impact on BAE Systems, Britain’s largest defence contractor and a major player in the US market. For instance, it is helping build the F-35 fighter.

Here is Dan Wasserbly, Americas editor for IHS Jane’s Weekly, who plays down the impact nonetheless:

Indiscriminate cuts will cause problems, but will not have the chaotic impact predicted by some of the nation’s top military leaders. A 10% cut isn’t going to lay to waste the most powerful military in the world. The biggest immediate impacts could hit Pentagon’s plans to buy new planes, ships, helicopters, drones, missiles submarines, ammunition, radios and more.

Updated at 11.26am GMT

10.51am GMT

Siemens

This is a bit of a guest-editor comment, but it is worth noting confirmation yesterday that Siemens of Germany has reached a commercial agreement on the £1.4bn Thameslink trains contract for more than 1,000 train carriages that will run in London – but will be built in Germany. On a basic level, this reflects a UK manufacturer, Bombardier’s Derby factory, being beaten by a European competitor for a domestic contract. It underlines the competitive pressures that UK-based manufacturers and would-be exporters face as we try to tilt the economy away from services.

Updated at 11.06am GMT

10.31am GMT

Rehn on Hollande’s parade

Olli Rehn, the Finnish European commissioner for economic and monetary affairs, has some guiding words for French politicians this morning. In an interview with Le Monde he says that France must carry out labour market reform and extend pension reforms. But that additional French budget savings are not essential. The Economist would disagree.

10.14am GMT

The British Chambers of Commerce, which represents 100,000 businesses in the UK – SMEs account for about six out of 10 people in private sector employment – says there were some pearls in the ONS data. But exports need a boost, notwithstanding this morning’s BAE contract.

Some of the additional detail, revealed by the new estimates, are however positive. Business investment has shown good growth in the third quarter, and there has been a strong improvement in net trade with exports up 1.2%, and imports down 0.4%. This reverses some of the deterioration in net trade that we saw in the first half of the year.

Notwithstanding these positive developments, it is clear that economic growth remains much too weak, and more effective measures are needed to enable businesses to drive recovery by strengthening the growth in exports and jobs.

Updated at 10.26am GMT

10.06am GMT

Satire is not dead

It is a brief YouTube clip admittedly, but the Daily Show’s reference to, and coverage of, the fiscal cliff situation as “Cliffpocalypsemageddonacaust” rather nails it.

Updated at 10.09am GMT

9.56am GMT

If the UK is a services-dominated economy, then there is evidently still much to be done to stoke consumer demand…

9.50am GMT

Down, down deeper and Dow

The FTSE retreat is gathering pace, just shy of -1% now at 56 points down. According to the US futures market, the Dow Jones Industrial Average will follow when it opens this afternoon, with the prediction that it will open 151 points down.

9.41am GMT

UK economy makes weak start to Q4

The circumstantial evidence that we might be heading for a triple-dip recession has gathered further weight this morning after the Office for National Statistics posted data showing a deterioration in the public finances since last year, meagre growth in the all-important services sector and a downward revision in third quarter GDP. Merry Christmas.

Public sector net borrowing excluding financial sector interventions – the government’s preferred measure – rose to £17.5bn in November, up from £16.3bn in the same period last year. Third quarter GDP growth was revised down from 1% to 0.9%. Services data showed that the sector – which accounts for three-quarters of UK GDP – grew 0.1% in October. The UK economy needs a stronger start than that as it enters Q4, because construction and manufacturing are weak too.

9.22am GMT

Cyprus downgrade

It doesn’t receive as much attention as its Greek neighbour or the other troubled eurozone countries, but Cyprus has been mired in financial crisis for some time now. As much as Greece, it is in danger of a euro default. In the latest blow, Standard & Poor’s has downgraded the state further into junk status, to CCC+, due to a “considerable and rising” risk that the country may default.

S&P said the Cypriot government is running out of money and uncertainty remains over a bailout that is being negotiated with international lenders.

Updated at 9.40am GMT

9.16am GMT

Berlusconi speaks

Silvio is always good for a quote. He is warning, apparently, that the nightmare of translating lira into pounds could return …

Updated at 9.40am GMT

9.15am GMT

Coming up

Some UK economic news is imminent, by the way. The last revision of Q3 GDP – the economy grew 1% in the three months to September – and the latest government borrowing numbers. These will be coming out at 9.30am.

Updated at 9.42am GMT

9.11am GMT

The boot is on the other foot…

9.09am GMT

Apocalypto?

A few dry asides in the newsroom this morning about the fact that the world hasn’t ended despite the anticipated arrival of the apocalypse on a tide of Mayan fire – but it appears to have brought turmoil to trains running into Paddington.

Michael Hewson of CMC Markets UK has picked up on the theme, warning that if Boehner and his fellow Republicans cannot even agree a solution to the fiscal impasse among themselves, we might be in serious trouble.

Given that today is supposed to be the end of the world I suppose we shouldn’t be too surprised at the lack of progress, but most market participants are by now probably losing the will to live as we head into the Christmas break.

Updated at 9.39am GMT

9.07am GMT

FTSE tumbles

As you would expect, the FTSE 100 has fallen this morning on the back of the Boehner meeting, slipping 48 points or 0.8% to 5909. On the blue-chip European indices, Germany’s DAX lost 0.3% and France’s CAC-40 was 0.1% lower in early trading.

Updated at 9.37am GMT

8.52am GMT

Fiscal cliff

Fears over the US fiscal cliff have hit the euro and are weighing on investors this morning, bringing some unfestive jitters to the start of the holiday season.

The euro fell 0.3% to $1.3210, away from an eight-month high of $1.33085, after the House of Representatives speaker, John Boehner, was rebuked by fellow Republican lawmakers over his plan to avoid a tumble over the fiscal cliff – a combination of tax rises and spending cuts that will kick in automatically in January if US politicians fail to agree a federal budget.

If you want to learn the basics, and you should because the impact will be significant, read our Q&A.

Updated at 9.36am GMT

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