January 8 2013

In the broadcast today: Will the Trend of JPY Weakness Continue? With the long overdue price correction of the Japanese yen’s losses against the U.S. dollar finally underway, we take a close look at some important price levels that could be targeted and examine the factors that could continue to keep the JPY under pressure, we analyze the latest trend developments in the USD/JPY currency pair, we keep an eye on the range bound price fluctuations of the EUR/USD pair, we note the weakening of the GBP vs. USD, we highlight the market’s reaction to the Japanese government’s plans to buy European Stability Mechanism bonds, the U.K. BRC Retail Sales, the Euro-zone Trade Balance and Unemployment Rate, and the German Industrial Orders, we discuss new forecasts from Citigroup, Barclays and Credit Suisse, and prepare for the trading session ahead.

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Jobless rate in the euro area hits 11.8%. Youth unemployment crisis deepens. Japan pledges to buy euro rescue bonds. Leaders of Germany and Greece are meeting in Berlin. German industrial orders dropped by 1.8% in November…

Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Unemployment rate hits new record high” was written by Graeme Wearden, for guardian.co.uk on Tuesday 8th January 2013 13.23 UTC

1.23pm GMT

My colleague Ami Sedghi has gathered all today’s unemployment statistics into a new Datablog post: Unemployment in Europe: get the figures for every country

12.10pm GMT

Photos: Antonis Samaras and Angela Merkel

Over in Berlin, Antonis Samaras and Angela Merkel have held a brief press conference before starting their meeting today.

The two leaders appeared cordial – and both told the assembled journalists that the eurozone was on the right course, but that more work was needed.

Greek prime minister Samaras said:

I would like to make clear up front that our country is undertaking great efforts that are linked with great sacrifices to get things back on track.

We are trying to win back credibility, on the part of the people of Europe and on the part of the markets.

Chancellor Merkel, though, warned that 2013 will be difficult.

We must agree on stronger economic policy cooperation by June this year, and there is plenty of work ahead of us.

Regarding Greece, Merkel said she would “of course be interested in what progress the implementation of the Greek reform programme is making”.

The Greek parliament approved that austerity package late last year (thus triggering new aid payments), but many of the measures have not been implemented.

We’re not expecting any further official comments from Merkel or Samaras today.

Updated at 12.35pm GMT

11.46am GMT

Dutch finance minister tipped for Eurogroup hot seat

Speculation is growing that Jeroen Dijsselbloem, the not-particularly-internationally-well-known Dutch finance minister, will be named as the next president of the Eurogroup.

The prestigious role (chairing the regular meetings of eurozone finance ministers) is up for grabs following Jean-Claude Juncker’s decision to step down.

Dijsselbloem’s name has been ‘in the mix’ for weeks, and Reuters is now reporting that the 46-year old fin. min. is conducting a European mini-tour, and very likely to get the job.

On Monday he met European Council President Herman Van Rompuy, as well as his colleagues from Belgium and Luxembourg.

He is expected in Rome on Tuesday and Paris on Wednesday.

“It looks like it is moving in the direction of the Dutch,” one senior euro zone policymaker said.

Dijsselbloem only became Dutch finance minister in November, but has apparently impressed his counterparts. The Wall Street Journal writes today that Dijsselbloem would be the latest low-profile official or politician to take a senior job in Europe, and also has nationality on his side:

The Netherlands, which is an important player in the euro-zone debate as one of the bloc’s most credit-worthy governments, hasn’t landed a top European job for one of its own recently.

The Italians have Mario Draghi as president of the European Central Bank. The French had Jean-Claude Trichet there for eight years, and they got Christine Lagarde as head of the International Monetary Fund. The Germans got Klaus Regling to lead the European Stability Mechanism, the euro zone’s new bailout fund. The Finnish have Olli Rehn, the EU’s economics commissioner, and the Austrians have Thomas Wieser as head of the Eurogroup Working Group, the body of senior bureaucrats that crafts the euro zone’s response to the crisis and does much of the legwork for the finance ministers.

11.09am GMT

German industrial orders dropped by 1.8% in November, according to data just released.

The drop was driven by a 4.1% slump in business from overseas, which more than cancelled out a 1.3% rise in domestic orders. Capital goods orders (ie, for large machinery) fell by 3.1%.

Another sign that the eurozone crisis has hit the region’s manufacturing core? Or just a blip – after all, orders were up 3.8% in October.

The German economy ministry isn’t panicking, saying there are signs that demand appears to be ‘stabilising’.

10.58am GMT

Eurozone retail sales, meanwhile, disappointed analysts. They inched 0.1% higher in November, but were 2.6% lower than a year earlier.

Updated at 11.12am GMT

10.56am GMT

Eurozone business sentiment rises

On a brighter note, though, economic sentiment in the eurozone has improved.

The EC’s monthly test of business morale rose in December for the second month running – beating analyst forecasts (it hit 87, up from 85.7 the previous month). That suggests firms may be growing more optimistic about Europe’s prospects.

10.40am GMT

Today’s unemployment data rather takes the shine off recent claims that the eurozone crisis is over. The immediate threat to the single currency has receded, but politicians and policymakers still face an ailing economy. Initiatives such as a banking union or the ECB’s bond-buying programme may hold the eurozone together, but they don’t deliver the hope of immediate growth.

The early reaction to the statistics focuses on the grim youth unemployment levels:

10.18am GMT

Europe’s youth jobless crisis has also worsened.

Today’s data shows that the youth unemployment rate for November was 23.7% in the European Union, up from 23.4% in October 2012.

The youth unemployment rate in the eurozone is now 24.4%, up from 23.9% the previous month.

And as usual, there are very sharp differences between northern and southern Europe.

The lowest youth jobless rates were recorded in Germany (8.1%), Austria (9.0%) and the Netherlands (9.7%).

The highest are in Greece (57.6% in September 2012) and Spain (56.5%).

10.05am GMT

New eurozone unemployment record high

Just in: the eurozone unemployment rate has hit a new record high of 11.8% in November, up from October’s 11.7%.

Eurostat reported that there are now 18.820 million people out of work in the euro area.

The wider EU unemployment rate remained at 10.7%,with 26.061m million men and women out of work.

The lowest unemployment rates were recorded in Austria (4.5%), Luxembourg (5.1%), Germany (5.4%) and the Netherlands (5.6%).

Again, the highest rates were seen in Spain (26.6%). (In Greece, the most recent data shows a 26.0% rate in September 2012).

More to follow.

10.00am GMT

WEF: Economic crisis threatens green agenda

The World Economic Forum has just warned that persistent economic weakness is sapping the ability to tackle the mounting threat from climate change.

Our economics editor Larry Elliott has the story:

Two weeks ahead of its annual meeting in Davos, the WEF said widening wealth gaps and unsustainable government debt were the two biggest risks cited by a panel of over 1000 experts and industry leaders.

Rising greenhouse gas emissions was the third most likely risk.

“Continued stress on the global economic system is positioned to absorb the attention of leaders for the forseeable future. Meanwhile the Earth’s environmental system is simultaneously coming under increasing stress,” the Global Risks 2013 report said.

“Future simultaneous shocks to both systems could trigger the ‘perfect global storm’ with potentially insurmountable consequences”.

You can see the full report here, on the WEF’s website.

Updated at 10.20am GMT

9.50am GMT

Key event

Greek prime minister Antonis Samaras has just told reporters in Berlin that his country is meeting its pledges on economic reforms.

Speaking at a conference organised by German newspaper Die Welt, Samaras said:

The glass is half-full. We are delivering and Europe is helping.

Samaras and Angela Merkel are still expected to hold a joint press conference later this morning.

Updated at 10.18am GMT

9.46am GMT

Italian youth jobless rate rises

Back in Europe, and youth unemployment in Italy has hit a new record high.

In November, 37.1% of young people across Italy were out of work – the highest since records began in 1992.

The wider jobless rate in Italy was stable, though, at 11.1%.

9.40am GMT

About that yen weakness….

I mentioned earlier that the yen had weakened against the dollar as Japan made its move around 2.20am GMT. Well, the effect didn’t last long, as this graph of the yen against the dollar shows:

That may be because traders have digested the fact that Japan will be using its existing currency reserves to buy bonds from the European Stability Mechanism, as Financial Times currency correspondent Alice Ross explains

9.02am GMT

Japan’s commitment to buying European bailout bonds is another sign that the crisis has abated, argues Takumi Nomura, a senior dealer at Bank of Tokyo-Mitsubishi UFJ.

Nomura said:

Japan has been playing a positive role in helping Europe ease the region’s debt crisis, so Mr. Aso’s comment made investors think European conditions will improve further.

Kit Juckes of Société Générale says the move adds “spice” to the speculation that was already swirling around the Japanese stimulus package expected soon.

Aso and Abe are now painted so deep into a corner on the currency that they have no choice but to deliver on promises to act aggressively….

All this talk of Japanese buying of ESM bonds helps support the Euro.

Eurozone exporters, though, might rather see a weaker euro. Although, as KhakiSuit points out below, the current fashion for a weak currency has its limits — as the Economist explains here: The weak shall inherit the earth, while there’s a robust critique here: The Currency Debasement Fallacy

Updated at 9.14am GMT

8.47am GMT

Japan’s promise to buy eurozone bailout bonds comes as the country’s new government strives to create economic growth, combat deflation, and weaken its currency.

The yen did fall against the dollar as Taro made his pledge, but quickly reversed the move [updated].

Here’s how Taro’s announcement is being reported:

Bloomberg: Japan to Buy ESM Bonds as Abe Steps Up Bid to Weaken Yen

Reuters: Japan finmin says will buy ESM bonds to help euro zone

MNI: Japan’s Aso Comments Spark Wild Moves in Euro, Yen

Updated at 9.26am GMT

8.29am GMT

Japan pledges to buy eurozone bailout bonds

Japan has announced that it will help Europe through its debt crisis by purchasing bonds issued by the eurozone bailout fund.

Speaking in Tokyo this morning the new Japanese finance minister, Taro Aso, announced that Japan plans to “continuously” take part in debt auctions conducted by the European Stability Mechanism, possibly starting today.

Aso refused to say how much Japan would buy, but insisted the plan would support Europe — and also benefit Japan by helping to weaken the yen.

Aso said:

Stability in Europe’s financial situation helps stabilise currencies including the yen.

From this standpoint and based on Europe’s further efforts on financial stability, Japan will purchase a portion of ESM bonds continuously by utilising foreign reserves.

Aso’s commitment will be welcomed in the eurozone, as the ESM is holding its first debt auction later today, selling three-month notes worth about €2bn.

The money raised from ESM bond sales is used to fund eurozone bailout programmes.

Masaaki Kanno, chief economist at JPMorgan Securities, told Bloomberg that Aso’s pledge would go down well in Europe:

The Europeans would be happy to see Japan buy ESM bonds, so Japan can avoid criticism from abroad and at the same time achieve its objective.

Japan already owns around €7bn of bonds issued by the eurozone’s temporary rescue fund, the EFSF.

8.16am GMT

Slew of data will show state of euro economy

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

There’s a busy morning ahead of us – at 10am GMT, fresh unemployment data for November 2012 will be released. Economists fear that the jobless rate across the eurozone could hit a new record high, up from November’s 11.7%.

With eurozone retail sales and economic confidence data also due at 10am GMT, and German factory orders an hour later, we should get a decent health check on Europe.

And on the political front, Angela Merkel and Antonis Samaras are meeting in Berlin today. The German chancellor and Greek PM are expected to hold a brief press conference this morning.

I’ll also be watching Italy, where the general election campaign is well under way following Silvio Berlusconi’s new alliance with the Northern League party (see yesterday’s blog…).

Updated at 9.51am GMT

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