December 27 2012

In the broadcast today: Is the USD Rally vs. JPY Unstoppable? As the Japanese Parliament approves Shinzo Abe, who has been very clear about his plans to weaken the currency, as the country’s new Prime Minister, we continue to monitor the market-wide assault on the yen and examine the factors fueling the USD rally vs. JPY, we analyze yet another bullish breakout in the USD/JPY currency pair, we note the EUR/USD pair’s move toward its 8-month high, we keep an eye on the GBP/USD currency pair, we highlight the market’s reaction to the Bank of Japan Meeting Minutes, the French and Italian Consumer Sentiment, the U.S. Jobless Claims, New Home Sales and Consumer Confidence, we discuss new forecasts from Bank of New York-Mellon, FX Concepts and Citigroup, and prepare for the trading session ahead.

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Mario Monti “meeting potential allies” today. Berlusconi hits back at outgoing PM. More troubles for Spain’s Bankia as the bank’s shares tumbled by another 14% today. U.S. jobless claims drop more than forecast to the lowest level in four and a half years…

Powered by article titled “Eurozone crisis live: Monti and Berlusconi set for election battle” was written by Graeme Wearden, for on Thursday 27th December 2012 14.14 UTC

2.14pm GMT

Bankia shares tumble as investors face total wipeout

Shares in Spain’s Bankia have tumbled by another 14% today after it emerged that investors in the deeply troubled bank will be all-but wiped out.

Last night, Spain’s bank rescue fund revealed that Bankia has a negative valuation of €4.2bn. The price of recapitalising the group, it seems, is that its shareholders will see their stakes cut to virtually nothing.

The news is another bitter blow to hundreds of thousands of small shareholders who took part in Bankia’s floatation in the summer of 2011, and have already seen their investments shrivel (it was nationalised back in May after being brought down by its toxic debt mountain)

Bankia is receiving €18bn through the recapitalisation of the Spanish banking sector but as one source explained to Reuters:

Are we looking into leaving shareholders with something? Yes. How much? That’s too soon to say. Will it be very little? For sure…..

But that will be purely symbolic. I can assure you they will lose up to the shirt on their back.

Bankia shares lost another €0.093 to €0.59 today, having floated at €3.75 17 months ago. Shareholders may feel they lost their shirts some time ago….

Updated at 2.14pm GMT

1.42pm GMT

US jobless data beats forecasts

Amid a quiet day for economic news, the number of Americans signing on for unemployment benefit for the first time has fallen close to its lowest level in four and a half years.

The US labour department has just reported a weekly jobless claims total of 350,000, a drop of 12,000, suggesting that America’s economy is ending the year healthily. However, Reuters cautions against reading too much into the data – as the numbers for 19 states had to be ‘estimated’ because federal workers were on holiday…

1.04pm GMT

Photos: Medical staff protesting in Spain today

Protests have been taking place in Madrid today against the Spanish government’s plans to cut health spending, and proposals to privatise some public hospitals and health centres.

Medical staff again urged Spain’s politicians to ditch the plans, warning they will hurt patients by eroding the quality of care:

12.32pm GMT

Lagarde: Gerrmany should resist rapid fiscal consolidation

Looking through the European papers, Der Spiegel is reporting that Christine Lagarde fears Germany may hamper the eurozone recovery by imposing domestic spending cutbacks after autumn’s general election.

The head of the IMF has apparently warned that Germany should resist any major fiscal consolidation efforts until the euro periphery is stronger.

Here’s a taste:

Germany and other countries “can afford to move ahead with consolidation at a slower pace than others,” Lagarde said. “That serves to counteract the negative effects on growth that emanate from the cuts made in crisis countries.”

The comments follow a report – denied by Berlin – that the German finance ministry is preparing a programme of tax hikes and spending cuts for 2014 (even though Germany appears to be on track to hit its target of a balance budget early)

Updated at 1.05pm GMT

12.18pm GMT

The euro has been gaining ground in the currency markets this morning, up 0.4 of a cent against the US dollar now at $1.3265.

Stock markets also remain calm (see also 10.04am), while traders await a breakthrough in the US fiscal cliff talks.

As fund manager Arnaud Scarpaci of Montaigne Capital in Paris put it to Bloomberg:

If there isn’t an agreement tonight, we can start worrying. If there is an agreement, we can have a little rally.

Meanwhile the FTSE 250 (composed of mid-value companies) hit a new lifetime high this morning. It’s gained around 23% this year — underlining how share prices shrugged off the eurozone crisis and the general economic malaise.

Updated at 12.35pm GMT

11.25am GMT

Key event

Over in Greece, the saga of the “Lagarde List” of alleged tax evaders rumbles on.

Greek newspaper Kathimerini reported last night that government officials have collected a new copy of the list (which was originally handed to Athens in 2010 and then curiously mislaid) from the French government.

Prosecutors are now checking whether this new list matches the existing version (which was produced by former finance minister Evangelos Venizelos in October).

Some media outlets claim that the new copy contains hundreds of extra names - running to 2,500 potential tax dodgers, not the 2,000 or so on the Venizelos list.

One source told Kathimerini:

The lists are being crosschecked name by name, amount by amount and if any differences are found, political and judicial responsibilities will be sought.

10.42am GMT

Italian debt auction proceeds smoothly

The Italian government has successfully raised almost €12bn this morning, despite the country’s political uncertainty.

The Italian treasury sold €8.5bn of six-month bills at an average yield (interest rate) of 0.949%, up from 0.919% in November – and the highest borrowing rate since October.

It also sold €3.25bn of two-year bonds at lower yields – 1.884% compared with 1.923% last month.

With fewer bond traders around, the sale looks like a success:

Updated at 10.42am GMT

10.16am GMT

Bundesbank chief: Italy must stick with Monti’s reforms

Back to Italy, and the head of the Bundesbank has warned that investors would lose faith in the Italian government if the reform programme put underway by Mario Monti faltered.

Jens Weidmann, Germany’s top central banker, told business news magazine Wirtschaftswoche that it would be “disastrous” if the country’s targets were called into question by next February’s election:

Italy suffers from low growth, low productivity and lack of innovation. But under the Monti government, Italy has set ambitious goals for reform in order to regain the confidence of investors, and had success with it.

Weidmann added that central bankers were not “sweepers”, there to clean up the mess created by politicians.

He was also cautious about suggesting the worst of the eurozone crisis was over, saying:

We have progressed a long way, but we must not underestimate the distance ahead.

The full interview is online here.

10.04am GMT

The financial markets are calm this morning as traders return to work following the Christmas break.

The major European indices are slightly higher, despite the fiscal cliff deadlock (see 9.56am). Here’s the latest prices:

FTSE 100: up 13 points at 5967, + 0.2%

German DAX: up 15 points at 6751, + 0.2%

French CAC: up 23 points at 3675, + 0.6%

Spanish IBEX: up 4 points at 8303, + 0.05%

Italian FTSE MIB: up 83 points at 16415, + 0.5%

And earlier this morning, Japan’s Nikkei closed at a 21-month high.

9.56am GMT

Geithner warns US could breach debt ceiling

The other big news this morning is that negotiations over the US fiscal cliff have still not reached a conclusion.

With the deadline to reach a deal looming, US Treasury secretary Tim Geithner warned yesterday that “extraordinary measures” might be needed to prevent the US hitting its $16.4tn (£10.16tn) debt ceiling.

Geithner warned Congress that the uncertainty over America’s tax and spending policies for 2013 meant the country risked breaching its borrowing limits.

He said the Treasury could raise $200bn through “extraordinary measures” – but warned that it wasn’t clear how much time that would buy.

US president Barack Obama has now cut short his holiday in Hawaii, heading back to Washington late last night….

Here’s our full story from late last night: US Treasury warns of ‘extraordinary measures’ amid fiscal cliff deadlock

Updated at 9.57am GMT

9.37am GMT

Berlusconi blasts Monti

The battle has already escalated this morning — with SIlvio Berlusconi launching an attack against Mario Monti on Italian TV today.

Berlusconi told Rai 1′s Unomattinathat Monti’s government had been ‘crushed’ by pressure from the rest of the eurozone, and repeated his pledge to abolish a key property tax.

Linkiesta’s Fabrizio Goria has tweeted the key quotes:

This comes after Monti was notably scathing about Berlusconi on Sunday, telling reporters that he was “struggling trying to follow” the PDL leader’s thinking…

9.26am GMT

A quick recap….

In case you’re been distracted by Christmas, here’s how events have unfolded in Italy in the last few days:

• The election battle really got underway last Friday, when Mario Monti formally stepped down: Mario Monti resigns as prime minister of Italy.

• On Sunday, Monti declared that he would be prepared to lead a group of parties who backed his reform agenda: Mario Monti considers return as Italian prime minister

• That agenda – including economic reforms and fiscal responsibility – was launched online on Christmas Eve: Mario Monti announces reform agenda for Italy

Monti also appears to have joined Twitter, tweeting late on Christmas Day that:

Together we have saved Italy from disaster. Now politics is due for renewal. Complaining does not help, you must work. “Let’s go” in politics!

9.05am GMT

Good morning, and welcome back to our rolling coverage of the eurozone financial crisis – and other events across the world economy as we edge nearer to the end of 2012.

With Boxing Day behind us, a meaty scrap is underway in Italy. Having resigned as Italian prime minister, Mario Monti is holding negotiations that could see him stay on as PM after next February’s elections.

Monti is expected to meet with prospective coalition partners today to discuss electoral strategy, and ‘candidate lists’ for the upcoming election.

He published his agenda for Italy last weekend — the big question for Italy (and arguably the eurozone too) is whether he will rally enough support for a credible election bid.

The Financial Times believes Monti is gearing up for a clash with his predecessor, Silvio Berlusconi, reporting this morning that:

Italy’s centrist politicians are rallying behind Mario Monti’s offer to lead an alliance into elections in February, setting the stage for a confrontation with Silvio Berlusconi in his attempt to return to power.


His decision to seek a second stint as prime minister, while not yet official, could lead to an even more fragmented parliament than had been expected. It injects a fourth element into a battle between the centre-left Democrats, Mr Berlusconi’s centre-right People of Liberty and the anti-establishment Five Star Movement.

And Berlusconi’s party has already hit back, accusing Monti of mishandling the Italian economy over the last 13 months.

As PDL member Anna Maria Bernini put it:

It is shocking to see how a man can present himself as a saviour after bringing the country to recession, taking all the merit (for successes) and attributing all the disasters to others.

So it’s looking like a tasty battle, which will play a significant part in Europe’s fortunes in 2013.

I’ll be tracking the developments in Italy, and beyond, through the day….

Updated at 9.08am GMT © Guardian News & Media Limited 2010

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