December 28 2012

In the broadcast today: USD, Fiscal Cliff Deadline and NFP Outlook. With 2013 just around the corner, another U.S. Non-Farm Payrolls report on the horizon, and anxiety levels rising as the “fiscal cliff” deadline approaches, we examine the outlook for these important events and explore their potential impact on the USD, we list the Top 10 spotlight economic reports that will move the markets in the first trading week of 2013, 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 range-bound price fluctuations in the EUR/USD and GBP/USD pairs, we highlight the market’s reaction to the Japanese CPI, Retail Sales and Industrial Production, the French GDP, and the U.S. Pending Home Sales, we discuss new forecasts from JPMorgan Chase, Bank of New York-Mellon and Bank of America Merrill Lynch, and prepare for the trading session ahead.

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Mariano Rajoy states that Span’s government is not planning to seek a bailout. French economy barely grew in third quarter of 2012. Nowotny: reasons for optimism over 2013. Schauble says “the worst is over for eurozone”. Is Japan the ghost of Europe’s future?..

Powered by article titled “Eurozone crisis live: Spanish PM predicts tough 2013″ was written by Graeme Wearden, for on Friday 28th December 2012 14.06 UTC

2.03pm GMT

Former Greek finance minister denies Lagarde List claims

Back to Greece, and our correspondent Helena Smith has full details of the allegations that broke today against former finance minister George Papaconstantinou, related to the list of alleged tax evaders (see also 12.42pm)

Helena writes:

Drama has erupted over revelations, now being made by the leading Greek daily Ta Nea, that the three names linked to former finance minister George Papaconstantinou in the famous Lagarde list are in fact relatives he allegedly sought to protect.

The three have been named as the two daughters of his politician uncle, the late Michalis Papaconstantinou, and one of their husbands with Ta Nea describing the account of at least one of the holders at the Geneva branch of HSBC as containing $US 1.222.000.

“These individuals, who had been dropped from the [original] list, allegedly held two accounts one of which included $US 1.222.000 while the movement of sums on the other [account] do not appear as it was a closed [account]. This is what emerged from the comparison of the two lists as a result of the investigation by the economic prosecutors Grigoris Peponis and Spyros Mousakitis,” Ta Nea wrote on its website.

As reported earlier, the new list arrived in cinematographic fashion in Athens a few days before Christmas. Ever since prosecutors have been earnestly studying whether it differs from the original handed to Papaconstantinou in April 2010.

But with Papaconstantinou adamantly denying making any changes to the list, Greek prosecutors are being cautious. Helena adds:

In the shrill climate that prevails in Greece, where calls for justice ring ever louder among a population blaming their country’s financial mess almost exclusively on the wrongdoing of politicians, prosecutors are also cautioning against a witch-hunt – one in which Papaconstantinou, who has stringently denied any suggestion that he tempered with the list, would be an easy victim.

The latest list reportedly contains the names of 2,062 individuals according to prosecutors who will study whether any of the depositors actively evaded taxes. The new list will be presented to parliament once it has been handed over to the ministry of justice, the paper says.

The reports have caused quite a storm on Twitter. And as the WSJ’s Matina Stevis explains, they have the potential to rock Brussels too.

Updated at 2.06pm GMT

1.22pm GMT

Rajoy went on to defend his austerity programme, claiming Spain would be in an “immeasurably worse situation” without it.

The priority now, he says, is to lay foundations for improving the economy in future.

1.16pm GMT

Here’s Rajoy’s full quote on the bailout issue:

We are not thinking of asking the European Central Bank to intervene and buy bonds in the secondary market…But we can’t rule it out in the future.

1.06pm GMT

Rajoy: don’t expect to ask for a bailout

Mariano Rajoy went on to credit the European Central Bank for calming the markets, through its offer of an unlimited bond buying programme to countries in distress.

But he also reiterated that he does not expect to apply for a bailout, thus triggering ECB action. Spain will ask for help if needed, though, he added.

That confidence reflects the recent drop in Spain’s borrowing costs since the summer, when the ECB’s Mario Draghi made his move.

1.01pm GMT

Rajoy: 2012 was tumultuous, 2013 will be tough

Spanish Prime minister Mariano Rajoy is giving his end-of-year press conference now.

Rajoy began by saying that 2012 has been a tumultuous year, but one that is ending with some calm in the financial markets.

He then warned that 2013 will be tough — particularly the first half of the year as the ongoing recession continues to bite.

After his first full year in office, Rajoy pinned the blame for the economic crisis on his predecessors.

Things have been more difficult than we expected.

And while austerity has been very unpopular, Rajoy argued that his tough policies are “starting to pay off”.

he added:

I will not ask for patience…or [or] blind faith, but understanding and solidarity.

Updated at 1.01pm GMT

12.42pm GMT

There are reports in Greece that former finance minister, George Papaconstantinou, is implicated on the ‘Lagarde List’ of suspected tax evaders.

Local media are claiming that three names “linked” to Papaconstantinou appear on the new version of the list obtained by the Greek government this month. However, they apparently do not appear on the version that came to light recently after being originally mislaid.

Papaconstantinou, who was finance minister when Christine Lagarde handed over the list, has robustly denied the suggestion that he manipulated the list in any way.

More to follow!

12.16pm GMT

Over in Athens, our correspondent Helena Smith says the architect of Greece’s admittance into the eurozone has ended the year with a damning indictment of the single currency bloc.

Helena writes:

Greece’s former prime minister Kostas Simitis, who oversaw the country’s entrance to the euro zone in 2001, slammed what he described as the “structural flaws” of the euro zone in an article published in today’s Frankfurter Allgemeine Zeitung.

Electing to use the prominent German daily to make the point that it was wrong to single out Greece as the sole instigator of the worst economic crisis to befall Europe since the Second World War, the German-educated erstwhile socialist leader said the entire architecture of the euro zone had to change. The founders of monetary union, he charged, had wrongfully believed that banks would automatically stop lending to euro zone states that had become overly indebted. “Trust in the power of the market to regulate everything was overly excessive,” he wrote.

A permanent solution to the crisis could only come “through deeper economic and political union,” said Simitis, a revered moderniser in his time even if Greece was later exposed to have cooked the books to get into the cherished common currency bloc. Reality, he argued, was now pressing for “a mutual contribution [to solving the crisis], the extent of which can not be foreseen only by legal texts.”

The biting commentary from one of Greece’s leading Europeanists will add fuel to the argument that Berlin will ultimately have to change tune if the euro zone is ever to properly function.

11.52am GMT

While we wait for Mariano Rajoy’s press conference…. economist Shaun Richards flags up that Spain’s GDP data for 2011 has been revised down today.

He fears that Spain will continue to suffer in 2013:

It is plain that the beat goes on in Spain and that the drums are beating a depressionary rhythm. So far the official numbers have not fully encapsulated this but perhaps today’s downwards revision for 2011 will be followed by others for 2012. The downwards spiral was caused by a boom and then bust in both her housing and banking markets which if the latest data is any guide are still developing. It appears that credit to other parts of the economy are being reduced too which is not a good sign either.

One bright spot is her balance of payments performance which has improved through this crisis and in July was positive for the first time in the Euro era. The trouble is that whilst there has been an export improvement this also represents a fall in imports due to economic weakness.

Also we see that in terms of bond yields they have retreated from the highs of the middle of this year and her benchmark ten-year is now far from where it began 2012 at 5.28%. The problem is that as problems and debts continue to build this is still much too high.

So we see that the problems of 2012 for Spain’s economy look set to carry on into 2013 with no respite in sight. In a country with an unemployment rate already at 25.02% as of the official numbers for the third quarter that is a prospect beyond chilling which sends a shiver down the spine. Unemployment of 5,778,100 is already far too high.

More here: What is happening in Spain’s economy and what is the outlook for 2013?

11.41am GMT

Heads-up: Spain’s prime minister, Mariano Rajoy, is due to give his end of year press conference this lunchtime (probably around 1.30pm local time, or 12.30pm GMT).

In the meantime, the Spanish stock market is losing ground – with the IBEX 35 now down 1.6%.

Bankia has tumbled another 25%, following yesterday’s news that existing shareholders will lose almost all their stakes when it is recapitalised.

11.28am GMT

Nowotny optimistic about 2013

European Central Bank policy maker Ewald Nowotny has joined the ranks of eurozone players predicting that 2013 will be a calmer year.

Nowotny, the governor of Austria’s central bank, said that eurozone leaders had made real progress in 2012. He cited the agreement on eurozone banking supervision, the decision to hand Greece its loan tranche this month, and the creation of the permanent bailout fund.

Altogether these are important measures that allow for cautious optimism for a way out of the crisis in 2013.

This follows Germany finance minister, Wolfgang Schauble’s, prediction that the worst is over for the eurocrisis….

Speaking of which, Reuters has rounded up the experts* whose predictions of a disaster in 2012 didn’t come true:

Euro doomsayers adjust predictions after 2012 apocalypse averted.

* Paul Krugman, Nouriel Roubini and Willem Buiter all get namechecked

11.01am GMT

Reassurance from Spain

One piece of good news this morning — capital is flowing back into Spain’s banking sector, as fears over the break-up of the eurozone subside.

The Bank of Spain reported a capital inflow of €12.1bn for October, the second month running in which more money moved into the Spanish banking sector than out of it.

It follows Mario Draghi’s famous pledge to defend the euro at all costs — but analysts caution against getting too excited.

As Martin van Vliet, senior economist at ING, told Reuters:

This confirms that ever since Draghi said he would do whatever it takes to save the euro, the capital flight has stopped and partially reversed…

It’s a positive development…but Spain is not out of the woods yet and the situation can change overnight.

10.26am GMT

Italian bond auction results

Over to Italy, where the Treasury has just raised €5.87bn through an auction of long-term bonds.

The cost of borrowing was the highest since October — 10-year bonds were sold at a yield of 4.48%, from 4.45%.

But there’s nothing too alarming here really – and no suggestion that the impending election is alarming the bond market.

World First’s chief economist, Jeremy Cook, certainly isn’t panicking:

10.07am GMT

Rather like an overstuffed Christmas diner, the UK stock market is struggling to move this morning.

The FTSE 100 is currently down just 0.37 points, somewhat to the chagrin of those who made the trip into the City:

Other European markets have fallen:

German DAX: down 9 points at 7646

French CAC: down 13 points at 0.36%

Spanish IBEX: down 79 points at 8201, – 0.1%

Italian FTSE MIB: down 51 points at 16356, – 0.3%

Updated at 10.08am GMT

9.39am GMT

Speaking of Japan, its Nikkei share index hit another 21-month high on its final trading day of 2012.

Traders are buying shares in anticipation of a huge injection of stimulus by the Bank of Japan. The NIkkei finished 72 points higher at 10,395, and analysts reckon it will break through 11,000 by early February.

Still some way shy of its lifetime peak of over 38,900 in 1989….

9.31am GMT

Kit Juckes: Europe must learn from Japan

Kit Juckes, global macro strategist at Société Générale, is concerned by France’s weak growth (see 8.37am) and Japan’s shrinking industrial output (see 9.18am). He writes:

Japan is stuck with deflation, Europe is stuck with recession. French Q3 GDP is flat y/y, which makes for a stagnant core and shrinking edges to the Euro Zone.

With a Dickensian flourish, Kit argues that Japan could be the Marley to Europe’s Scrooge:

Europe has much to learn from Japan’s woes. And indeed, if Europe wants to see more growth and a lower debt level than Japan has seen in the 23 years since the Nikkei peaked, they’d better get learning.

Don’t expect your currency to be weak just because your economy is, is one lesson. The correlation between the euro’s value and peripheral bond spreads tells us the euro does well whenever the Euro-crisis is put on the back-burner, as is now the case. But a strong euro is no more reason to cheer than a strong yen.

The ghost of Christmas yet to come can be seen by Eurocrats any time they want to brush up on modern Japanese economic history. Act now or deflate at your peril.

Updated at 9.31am GMT

9.18am GMT

The consequences of Europe’s weak economy continue to be felt in Japan, where industrial output has slipped again.

Industrial production in the world’s third-largest economy fell by 1.7% in November, compared with a year ago.

It adds impetus to new prime minister Shinzo Abe’s plans for a stimulus package and looser economic policies. But with Japan already in recession and battling deflation, it’s another reason to be downbeat about 2013.

8.59am GMT

Hot on the heels of France’s updated GDP data comes another fall in Spanish retail sales.

Retail sales across Spain slumped 7.8% in November, compared with a year earlier. That’s the 29th monthly fall in a row.

Spanish retailers have already admitted that Christmas did not go well, as the public suffered from the recession, austerity cut backs and tax rises.

Ainhoa Garcia, spokeswoman for the Spanish Commerce Confederation, told Reuters yesterday:

The Christmas campaign didn’t take off the way it was expected to and we know sales are down compared to 2011 though we don’t have the figures yet.

8.37am GMT

French GDP growth cut

Good morning, and welcome to another day of rolling coverage of the eurozone financial crisis, and other events across the world economy.

We start with some disappointing news for France. New GDP data released this morning showed that its economy barely grew in the third quarter of 2012. GDP increased by a paltry 0.1%, not the +0.2% first estimated.

The revision means France economy failed to post any growth at all over the last 12 months, and reinforces the fact that the eurozone itself is in a double-dip recession (as covered here last month).

The weak performance was driven by a drop in imports (which fell by 0.5%) and business investment (-0.6%). That suggests French firms were hunkering down during the early months of François Hollande’s presidency.

The data comes hours after the latest jobless data showed that the number of people out of work in France has risen for the 19th month in a row, to its highest level in nearly 15 years.

The French unemployment total rose by 29,300 in November, to 3.13 million. France’s unemployment rate is already 10.3%, rather worse than the UK, Germany or the US — but still below the eurozone average.

So while the worst of the crisis may be abating, Europe’s economy remains troubled. And with America’s fiscal cliff problems also unresolved, it feels like a nervy end to the year……

As usual, I’ll be covering the latest news, reaction and market moves through the day.

Updated at 8.40am GMT © Guardian News & Media Limited 2010

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