January 17 2013

In the broadcast today: Is the EUR about to Join the “Currency Wars”? With the Eurogroup Chairman Jean-Claude Juncker calling the euro exchange rate “dangerously high”, we take a close look at the EUR as it holds firmly into the $1.30′s and ponder if the single currency might be the next most likely candidate to join the “currency wars”, we analyze the latest trend developments in the EUR/USD currency pair, we take a look at the renewed bullish momentum of the USD vs. JPY, we note the signs of weakness in the GBP/USD currency pair, we highlight the market’s reaction to the comments by the Japanese economy minister, the Australian Employment report, the U.S. Housing Starts and Jobless Claims, we discuss new forecasts from Bank of New York-Mellon and Commerzbank, and prepare for the trading session ahead.

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The IMF said Greece was moving in the right direction as it unfroze the next tranche of aid to the stricken country. US jobless claims dropped to a five-year low of 335,000, compared with expectations of 369,000, while housing starts had their best year since 2008…

Powered by Guardian.co.ukThis article titled “Eurozone crisis live: Relief as Greece secures IMF cash” was written by Josephine Moulds, for guardian.co.uk on Thursday 17th January 2013 14.30 UTC

2.30pm GMT

Open Europe is running an interesting blog post, asking ‘Do Ed Miliband and David Cameron actually agree on Europe’?

Miliband appeared on Radio 4′s Today Programme this morning, calling for a “more flexible Europe”.

Why do I say that? Because we will have some countries in the euro, Britain’s not going to be joining the euro, won’t be joining the euro if I’m Prime Minister, and therefore by the nature of it, we’re going to have some countries that are in the euro and some countries that are out. That makes, what I would call, a more flexible European Union.

Open Europe notes that this is almost exactly what Cameron says. The pair also agree on the need for a referendum if there is a transfer of powers to the EU, and the need to repatriate powers.

In fact, Open Europe says, the only difference in policy that Miliband can point to is his view on the European Arrest Warrant. Milliband thinks it is good, Cameron does not. It writes:

Even here, from the Government’s point of view, the real question is reform of the EAW and the jurisdiction of the [European Court of Justice] post 2014, and whether to opt back into this particular measure.

It concludes:

This a country far more united on the need for anew relationship within the EU than the politicians would dare to admit.

2.01pm GMT

Markets cheered by US data

To the markets, which were cheered by the upbeat data out of the US (see 1.55pm). Futures are suggesting a 68 point rise on the Dow Jones when it opens at 2.30pm.

UK FTSE 100: up 0.41%, or 25 points, at 6129 points

Germany DAX: up 0.6%

France CAC 40: up 1.08%

Spain IBEX: up 0.89%

Italy FTSE MIB: up 1.28%

1.55pm GMT

US data boosts confidence

There’s some cheery news out of the US, where jobless claims dropped last week and housebuilding rose in December.

The number of Americans filing new claims for unemployment benefits dropped to a five-year low, to 335,000, compared with expectations of 369,000.

Separately, housing starts climbed 12.1% in December to a 954,000 annual rate, the best year for the industry since 2008.

Frank Lesh, futures analyst and broker at Futurepath Trading, said:

The housing data was great and so were these jobless claims. Both of them said ‘buy more equities’. We are going to keep going up until some of these problems surface and it stops us, if they do. At this point you just don’t know how [negotiations over the next 'fiscal cliff' are] going to turn out, but do you just sit on the sidelines and wait? No! It’s great news and it should take the markets higher.

1.41pm GMT

Athens metro workers to strike again on Friday

Over to Greece, where Athens metro workers say they will extend today’s strike over pay and will not work tomorrow. The union leader Antonis Stamatopoulos told Skai radio:

People will need to suffer now, but we will earn their eternal gratitude after this government has been thrown out.

Updated at 2.01pm GMT

1.29pm GMT

Lunchtime round-up

And for a quick lunchtime round-up…

The Greek finance minister, Yiannis Stournaras, says it is too early to declare victory, after the IMF waved through its next tranche of aid. (9.37am)

Portugal, whose bailout programme ends next year, could return to the debt markets in the coming days, according to a Portuguese newspaper. (9.18am)

The Italian PM, Mario Monti, has struck an anti-Berlusconi pact with the frontrunner in the forthcoming elections, Pier Luigi Bersani, says La Repubblica. (8.41am)

The European Council president, Herman Van Rompuy, calls the end of the crisis, saying the worst is behind us. (10.09am, 11.38am)

EU leaders will resume budget talks in February. (11.09am)

Updated at 1.31pm GMT

1.22pm GMT

Portuguese PM: plans to issue long-term debt his year

Sticking with Portugal, the prime minister, Pedro Passos Coelho, says the country hopes to carry out long-term bond issues this year, as envisaged in the bailout agreement. Speaking in Paris, he said:

Our objective this year is to return to the [bond] market. We are seeking to carry out long-term [debt] issues and hope to gain the necessary support from our partners to do that.

Updated at 1.31pm GMT

12.28pm GMT

The Portuguese government has reacted to reports that it could return to the debt markets in February (see 9.18am). Reuters reports:

Portugal government says authorised debt agency IGCP to issue public debt and early loans redemption.

It says the IGCP can act to take advantage of market opportunities after improvement in sentiment. The country is doing all it can to return to the market as soon as possible. But it says there is no set schedule.

12.02pm GMT

Greek former finance minister to speak out on ‘Lagarde list’

Over to Greece again, where our correspondent Helena Smith says the country will be hanging on the words of the former finance minister George Papaconstantinou when he addresses parliament today. She writes:

The speech is being eagerly awaited – with TV stations saying they will break into their programme schedules to air it – as Papaconstantinou is the central figure in the ever deepening scandal over the “Lagarde list”, the tally of suspected tax evaders that Papaconstantinou was handed by Christine Lagarde when she was French finance minister in 2010.

With the 300-seat House preparing to vote on whether to launch a criminal investigation into Papaconstantinou’s alleged mishandling of the list – he stands accused of not only failing to act on the list but actively deleting the names of three of his relatives on it – many are keen to hear what he will say.

This is the first time the LSE-trained economist will speak publicly on the matter. “He is in a difficult position but we have seen a lot of things and we have to assume innocence,” said Nikos Bistis, a lawmaker with the Democratic Left, one of three parties supporting prime minister Antonis Samaras’ conservative-led coalition.

Lagarde, now head of the IMF, said in an interview with SKAI TV last night that Papaconstantinou had asked her for the list of wealthy Greeks with banks accounts at the Geneva branch of HSBC with a view to investigating whether they had declared the deposits. Many of the account holders are believed to have stashed the deposits abroad in a bid to dodge taxes.

Updated at 12.12pm GMT

11.56am GMT

Meanwhile, investors are still paying the UK to keep their money. Today’s auction of gilts due in 2029 resulted in a yield of -0.37%, compared with -0.025% in August last year.

11.38am GMT

Van Rompuy says the crisis is over (we can all go home)

Back to Van Rompuy, the EC president, who has released the text of his speech to the European Economic and Social Committee (in French). He said:

2013 started on a hopeful note. The signs point to the fact that the worst is well and truly behind us… For the first time in months, financial stability is back.

But he warned that it would still take time for that to have any real impact on the economy.

While this rediscovered stability is vital for a recovery, the reality is that we need time for it to have any concrete effect on the economy and employment. There is always a delay between the return of stability and a return to growth. There is a further delay on top of that, between the return to growth and an improvement in the employment situation.

He welcomed the banking union and efforts to explore greater economic and budgetary union. But he said:

We must never forget the social dimension of our economic policies. Stability is a means, but not an end in itself. Our entire approach must be social in its nature.

No doubt there is a more upbeat haiku in the offing. Any suggestions? For inspiration, here is Van Rompuy’s rather gloomy offering in November last year, titled Autumn end November:

The night has fallen

The bare branches can be seen

Even more lonely.

Updated at 12.11pm GMT

11.09am GMT

EU officials to resume budget talks in February

European Union leaders will resume battle over the region’s long-term budget at a summit in Brussels on 7-8 February, Reuters reports.

Last time they met, in November, the leaders failed to come to an agreement over the budget worth nearly €1,000bn, which covers spending for 2014-2020. One EU official told Reuters:

The intention is to pick up the discussions where they have been suspended last time.

Updated at 11.15am GMT

11.03am GMT

Germany warns against inflation

Germany is warning against Europe printing money to find its way out of the crisis. The Germany finance minister, Wolfgang Schäuble, says:

Inflation is the greatest social injustice.

He says the bailout fund, the European Stability Mechanism, should only provide direct help for banks as a last resort. Looking further afield, Schäuble says he is “quite worried” about the new Japanese government’s policy of flooding market with yet more liquidity.

He sounds a cautiously optimistic note on the crisis, however, saying we’re not over the hill but we are on the right path.

Updated at 11.16am GMT

10.35am GMT

Construction data out of the eurozone would appear to show a brightening picture, though it’s still pretty bleak.

Construction output dropped by 0.4% in November. Previous estimates suggested output dropped by 1.6% in October, but that has been revised to “no change”.

Updated at 11.16am GMT

10.19am GMT

Economic weakness to continue this year, says ECB

And the European Central Bank remains downbeat in its monthly health check of the eurozone. It expects economic weakness in the eurozone to continue this year.

In particular, necessary balance sheet adjustments in financial and non-financial sectors and persistent uncertainty will continue to weigh on economic activity.

There is a light at the end of the tunnel. Later in the year, the ECB says, economic activity should gradually recover.

In particular, the accommodative monetary policy stance, together with significantly improved financial market confidence and reduced fragmentation, should work its way through to the economy, and global demand should strengthen. In order to sustain confidence, it is essential for governments to reduce further both fiscal and structural imbalances and to proceed with financial sector restructuring.

But there are still significant risks that things will go worse than planned. Particularly if governments are slow to implement reforms, it writes.

The risks surrounding the economic outlook for the euro area remain on the downside. They are mainly related to slow implementation of structural reforms in the euro area, geopolitical issues and imbalances in major industrialised countries. These factors have the potential to dampen sentiment for longer than currently assumed and delay further the recovery of private investment, employment and consumption.

10.12am GMT

But tensions in the eurozone remain. Someone in Athens took a novel approach to expressing their hatred for the German chancellor with an imaginatively named Wi-Fi network.

Updated at 10.51am GMT

10.09am GMT

The worst is behind us, says Herman Van Rompuy

The worst is well and truly behind us, says Herman Van Rompuy, president of the European Council (and haiku fan), this morning.

Speaking at the European Economic and Social Committee, he says the European Union is at a turning point today.

Citizens to be more than ever in the center… We must never lose sight of the social dimension of our economic policies.

9.54am GMT

Spain’s borrowing costs ease at key bond auctions

The results of Spain’s bond auctions are coming in and borrowing costs are coming down.

The average yield (essentially the interest rate) on the 2041 bond was 5.696% this morning, compared with 5.893% on 13 December.

The average yield on the 2018 bond was 3.77%, vs 3.988% on 10 January.

The average yield on the 2015 bond was 2.713% vs 3.358% on 13 December.

In the secondary market – where traders buy and sell bonds that have already been issued – the yield on Spain’s 10-year government bond is creeping down towards 5%. Tradeweb currently has it at 5.039%.

Updated at 10.12am GMT

9.37am GMT

Greek finance minister says too early to declare victory

It is too early to declare victory, says the Greek finance minister, Yiannis Stournaras, after the IMF waved through the stricken country’s next aid payment.

In an interview with Reuters, Stournaras said the country must resist internal political pressure to slow economic reforms in a year that will dictate whether it avoids bankruptcy.

What scares me is the big pressure from society, media and parliamentary deputies from all parties to ease the programme. We must resist… it’s too early to declare victory.

He ruled out another debt buyback and said there was no discussion of a haircut of Greece’s debts to its eurozone partners. He said debt reduction could come in other ways such as cutting interest rates.

Under the heading ‘Good News’, Reuters reports that Greece expects to meet this year’s target of making €2.6bn through privatisation. The country may also need less than the €50bn set aside for bank recapitalisaitons, as a result of a wave of mergers between banks.

Updated at 9.53am GMT

9.18am GMT

Portugal set to tap debt markets

And it looks like Portugal might be about to return to the debt markets, sooner than expected. 

The country – which has imposed stinging austerity in exchange for a bailout from the troika – is planning to issue five-year bonds in the coming days, according to Diario Economico.

António Costa reports that the government has decided to tap the debt markets before the end of February, following a successful sale of Treasury bills on Wednesday, citing unnamed sources. The final decision will depend on the outcome of a roadshow in the US this week, the Eurogroup’s meeting Monday and the 2012 budget execution report next Wednesday.

Portugal – whose bailout expires in 2014 – was expected to return to markets in September 2013 when it is due to repay some €5.8bn of debt.

This week the Portuguese government published new tax rules that further cut the income of workers and pensioners, prompting fresh protests from a normally mild-mannered population.

Updated at 9.51am GMT

8.41am GMT

Monti and Bersani make deal

Over in Italy, there are reports that the prime minister, Mario Monti, and Pier Luigi Bersani, the frontrunner in next month’s elections, have reached an “anti-Berlusconi deal” for the campaign and a possible post-election alliance.

La Repubblica reports (in Italian) that the pair have identified the former leader Silvio Berlusconi as their opponent and will try to direct their campaign towards a common goal: an alliance between progressives and moderates following the election.

Updated at 9.50am GMT

8.31am GMT

EU’s Rehn calls for French reforms

France needs wide-ranging structural reforms, says the EU vice-president Olli Rehn.

Rehn says France may need to take more steps to curb its deficit. The country’s unemployment problem also needs specific attention, he says. France had an unemployment rate of 10.5% in November last year, compared with the UK’s 7.8%.

Rehn also says France has serious external imbalances, which will raise eyebrows. (Thanks to Bloomberg for the headlines).

Updated at 9.47am GMT

8.13am GMT

Today’s agenda

Spain holds a series of bond auctions today, where it is expecting strong demand and sharply lower yields. The ECB also publishes its monthly report this morning and the IMF chief Christine Lagarde will be talking in Washington later.

  • Swiss producer and import prices for December: 8.15am
  • ECB monthly report: 9am
  • EU’s Herman Van Rompuy speaks: 9am
  • Bank of England’s Tucker speaks: 9am
  • Eurozone construction output for November: 10am
  • US housing starts for December: 1.30pm
  • US weekly jobless claims: 1.30pm
  • Germany’s Angela Merkel attends an election rally: 4pm
  • IMF’s Lagarde holds a news conference: 4pm

In the debt markets, Spain will sell up to €4.5bn of bonds due in 2015, 2018 and 2041. The UK is selling £1bn of index-linked gilts due in 2029 and France is selling up to €8bn of bonds due in 2015, 2017 and 2018.

Updated at 9.46am GMT

8.08am GMT

Good morning and welcome to our rolling coverage of the eurozone crisis. The IMF agreed to pay the next tranche of bailout aid to the Greek government last night, averting a catastrophic default and securing the country’s survival in the eurozone.

The €3.24bn instalment had been frozen as the IMF considered Athens’ economic reforms. Christine Lagarde, the IMF chief, said yesterday that Greece had made progress but urged it to do more to boost productivity.

Meanwhile, Sweden has joined the chorus of voices urging David Cameron to keep Britain at the centre of the European Union. Cameron is due to give a speech on Friday, outlining plans to renegotiate the UK membership of Europe and put it to a referendum.

Last night the Swedish finance minister, Anders Borg, said he was concerned that the European project was becoming less popular in the UK.

We would not like to see the UK sliding away from the European Union. For Europe, for Sweden, for the UK it is a key interest to keep Britain’s perspective in the European Union.

Like Britain, Sweden belongs to the European Union but has not adopted the euro.

Updated at 9.45am GMT

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