Eurozone crisis live: Currency wars come to Moscow as G20 meets

G20 aims for stronger commitments against exchange rate manipulation. UK retail sales plunge in January, down 0.6% on the month, compared with expectations of a 0.5% increase. Eurozone trade surplus widens. US industrial production drops…

Powered by article titled “Eurozone crisis live: Currency wars come to Moscow as G20 meets” was written by Josephine Moulds, for on Friday 15th February 2013 14.53 UTC

2.53pm GMT

And with that I will hand over the blog to Nick Fletcher. Thanks for all your comments and have a lovely weekend.

2.26pm GMT

US industrial output falls on weak manufacturing

US industrial production dropped unexpectedly in January, weighed down by weak manufacturing and mining.

Industrial output dropped 0.1% over the month, compared with a rise of 0.4% in December, and expectations of a rise of 0.2%.

But Markit points out that the three-month trend is positive, with production rising by 1.6% compared with the previous three months.

2.19pm GMT

Eurozone trade surplus masks worrying developments – economist

Just back to the eurozone trade figures briefly (see 10.14am), which showed a healthy-looking surplus in December.

Howard Archer of IHS Global Insight notes that the underlying picture was not so encouraging as both exports and imports fell appreciably in December and over the fourth quarter of 2012. He writes:

This suggests that the markedly increased 0.6% quarter-on-quarter drop in Eurozone GDP in the fourth quarter of 2012 was significantly influenced by a weakened export performance. Meanwhile, the appreciable drop in Eurozone imports is consistent with weakened Eurozone domestic demand in the fourth quarter.

1.49pm GMT

Bernanke syas US in line with G7 stance

Fed chairman Ben Bernanke is now speaking at the G20. He says a strong US economy equals a strong world economy.

The US is acting in line with the position of the Group of Seven nations, he says, by using domestic policy tools to boost growth and reduce unemployment.

Consistent with the G7 policy statement, the US is using domestic policy tools to advance domestic objectives.

Updated at 2.00pm GMT

1.33pm GMT

Putin tells G20 to get their houses in order

Russian president Vladimir Putin, meanwhile, told the Group of 20 nations that it was vital to eliminate economic imbalances and have a clear strategy on borrowing to put the global economy on a sustainable growth path.

The days when economic crises had an isolated impact are gone. Problems in the US and the eurozone affect each country’s economy.

1.26pm GMT

Lagarde says talk of currency wars is “overblown”

Now IMF chief Christine Lagarde is up. She too says talk of currency wars is “overblown”.

Yes, the euro has appreciated and yes the yen has depreciated, but that is the result of good policies in the eurozone and looser policy in Japan. There is no major deviation from fair value of major currencies.

1.20pm GMT

G20 statement will not make commitments re fx rates

The G20 draft will make not mention a commitment to not target foreign exchange rates, Reuters is reporting, citing a G20 delegate.

Headlines on the wires suggest the latest draft communique will repeat previous language on avoiding excessive foreign exchange volatility and disorderly movements in foreign exchange rates.

But the G20 deputies did not single out Japan in their disucssions about the communique, the G20 delegate said.

Reuters says the draft also reaffirms commitments to medium-term fiscal plans but says some countries need to take into account near-term considerations.

It does not include this week’s G7 language on the need to use fiscal and monetary policies only for domestic objectives.

The (remarkably talkative) G20 delegate said the deputies debated whether fiscal consolidation has been too aggressive or whether the lack of fiscal consolidation has led to too much uncertainty.

Very few pictures coming through from the meeting, but here’s the OECD’s Angel Gurria giving Russia’s finance minister a big hug.

12.01pm GMT

Portuguese PM opens door to cutting 2013 forecast

Back to Portugal, where the prime minister is sounding downbeat about the country’s prospects this year. Pedro Passos Coelho suggested the government may have to cut its forecasts for this year, saying:

The [fourth quarter] results leave us with a level of foreign demand that, if extended into 2013, will not allow us to maintain the projections we have made.

Portugal is in its third year of recession, as it labours under a crippling austerity programme imposed by the country’s international lenders.

10.59am GMT

Meanwhile, over in Moscow, the governor of the Bank of Japan Masaaki Shirakawa is saying countries must be aware of the impact of domestic policies on the rest of the world.

While the head of the OECD Angel Gurria tells CNBC we are further away today from a currency war then we were two or three years ago.

10.47am GMT

UK consumers are skint – Guardian’s Larry Elliott

Here’s our economics editor, Larry Elliott, on the UK retail sales figures. He says, while you can blame the snow for some things, the real reason behind poor sales is that consumers don’t have the money to splash out. More online shortly…

The best explanation of all, therefore, is the most obvious one: consumers are skint. Real incomes, according to the ONS, are back to 2003 levels, and with petrol prices again rising sharply there is simply less money available for discretionary spending.
But isn’t this inconsistent with an improving labour market, which should be leading to an increase in aggregate incomes? Not at all. Rising employment masks two big trends: the increase in part-time work and the willingness of workers to accept cuts in real (inflation-adjusted) pay in order to avoid losing their jobs.
As a result, spending power for millions of Britons is weak and is likely to remain so. That’s why the ONS is reporting that the proportion of on-line sales remained above the 10% mark in January. Normally, there is a spike in internet buying in December as consumers load up on CDs, books and clothes for Christmas presents, and then the percentage falls back. This year it has remained high, a sign that Britain has not lost the spending habit but is being forced to shop around for bargains.

10.34am GMT

Brazil will not allow over-appreciation of real

Brazil’s finance minister Guido Mantega is now making his voice heard over in Moscow at the G20. He says Brazil will not allow an over-appreciation of the real.

Mantega is thoguht to have coined the term “currency wars” to describe the series of competitive devaluations adopted by rich nations to bolster their exports to the detriment of emerging market nations. Reuters reports:

Since then Brazil has actively sought to depreciate its currency, the real, to protect local manufacturers of everything from shoes to suits and make its exports more competitive. It has taken bold action to curb speculative capital inflows with higher taxes.

10.14am GMT

Eurozone trade surplus widens

[Clarification: Using the monthly figures (as usual) apologies to those who prefer yearly statistics]

The eurozone trade surplus widened in December, with imports falling at a faster rate than exports.

Eurostat said the unadjusted trade surplus was €11.7bn in December. That is higher than the €8bn a year earlier, but lower than forecasts for a rise to €13.1bn.

The biggest single improvement was in Italy, which swung to a €9bn surplus in the first 11 months of 2012, from a deficit of almost €27bn a year earlier.

Updated at 11.33am GMT

10.06am GMT

Chris Williamson of Markit is more upbeat.

While the snow clearly had an impact on sales, the decline was nothing like as severe as we’ve seen in previous years. For example, the 0.6% decline in January compared with a 1.9% monthly fall in December 2010, when the country was also hit by heavy snow. The data therefore add to other survey evidence which suggests the economy got off fairly lightly from snow disruption, further allaying fears of a weather-related “triple dip” recession. We should also remember that retail sales are not used in the calculation of the first estimates of GDP, which the PMIs suggest is still on source to recover from the downturn seen late last year.

10.04am GMT

Rob Wood of Berenberg Bank agrees that the snow is not the whole picture.

The snow problem shouldn’t disguise the real problem, however. The underlying picture is that the economy is bouncing along the bottom, so weather disruptions can easily tip it into negative territory.

The underlying story is a familiar one for UK households, which have been fed a diet of meagre wage growth and above target inflation for much of the past four years. As inflation heads up again, those meagre wage rises will stretch even less far and consumption will struggle to get going for a little while yet. The particularly disappointing aspect of today’s data is that the growth in the value of spending on the high street also slowed to a standstill as households presumably tried to boost their savings.

The chances of a triple-drip had receded a little with improved data in recent weeks, but in truth the data had not pointed to much momentum. And this release brings a dip back on the table. If the snow disruption is reflected in other industries, with construction being the most likely candidate again, then we could well see a quarterly contraction in Q1 2013.

10.02am GMT

Here’s Howard Archer of IHS Global Insight on the dire UK retail sales figures.

Even allowing for a substantial hit to retail sales from the snow, the further fall in January fuels concern that consumers may be becoming more careful in their spending as consumer price inflation moves back up and squeezes purchasing power.

A serious concern for retailers – and the economy in general – is that consumers’ purchasing power is coming under renewed pressure from a move back up in inflation while earnings growth remains muted.

9.52am GMT

450 new eBay jobs in Ireland

Briefly over to Ireland where there is some good news on the jobs front, with the announcement of 450 posts from eBay in the border town of Dundalk. Our correspondent in Dublin Henry McDonald reports:

The Taoiseach Enda Kenny visited eBay’s operation centre in Dundalk this morning at the launch of the new jobs.

eBay has joined the likes of Facebook, Twitter, Linked-In and Google in establishing their European base in the Republic.
The new posts will help provide the growing European customer base of the company’s eBay Marketplaces and PayPal businesses with an enhanced experience in the areas of customer services, sales and compliance. The new positions, which are in addition to 1,000 new jobs announced by PayPal last year, are located within its Customer Services team and also based at the Dundalk facility.

Gary Hagel, Senior Director, eBay Customer Experience, UK, Ireland and Rest of Europe said: “eBay’s continued commitment to its customers is underlined through this investment in customer services team members fulfilling a variety of roles to make eBay an even better place to shop and sell. Ireland is a centre of excellence for our Global Customer Experience function and the country provides a highly-skilled workforce for eBay with the required technical and language skills, an attractive research environment and proven track record on delivery.”

Louise Phelan, Vice President Global Operations EMEA at PayPal said: “Today’s announcement is fantastic news for the Dundalk area. We are looking forward to welcoming our eBay colleagues at the PayPal site in Dundalk. Last year was a great year for PayPal in Ireland. Our Dundalk site was operational within 11 weeks of the contracts being signed. We currently have over 230 people employed on site there and we look forward to continuing to expand this number in 2013.”

Updated at 9.57am GMT

9.44am GMT

UK headed for triple-dip?

Just to recap, the UK economy shrank in the final three months of 2012. If it contracts again in the first three months of this year, that will plunge the UK into its third recession in four years… the dreaded triple-dip.

That would leave chancellor George Osborne’s reputation in tatters.

And consumer spending is a huge part of the UK economy, as noted by Sky’s Ed Conway.

9.41am GMT

Here’s James Knightley from ING on the impact of retail sales on the pound.

The ONS stated that there was an impact from snow which had particularly hurt small grocers. This adds to the negative newsflow on the UK with worries over the UK’s EU referendum and the Scottish independence vote along with a potential rating downgrade all helping to keep downward pressure on sterling.

9.40am GMT

Rather than the snow, some analysts see a more fundamental issue at play in the UK retail sales figures.

9.39am GMT

Sterling tumbles on poor retail sales figures

The news has sent the pound tumbling to its lowest point in more than six months against the dollar, at $1.5470.

9.36am GMT

Brits go on diet as snow falls

The main factor driving UK retail sales lower was a slump in food sales, with food sales down 1.6% in January, the largest monthly fall since May 2011.

Even more starkly, food sales were estimated to have fallen 2.6% year-on-year (seasonally adjusted), to the lowest level since April 2004.

The ONS says small grocers blamed poor sales on the heavy snowfall at the end of the month.

As energy and futures trader Nicola Duke notes, the figures do seem to represent reality out on the streets.

Updated at 9.38am GMT

9.32am GMT

UK retail sales slump in January

Ouch. UK retail sales slumped dramatically in January, down 0.6% on the month, compared with expectations of a 0.5% increase.

That’s terrible news for George Osborne as it will reignite fears that the UK is headed for a triple-dip recession.

9.23am GMT

We’ve got UK retail sales figures for January coming up and the forecasts are pretty upbeat. Economists expect December’s 0.3% decline to swing to a 0.5% rise in sales over the month.

Although Marc Ostwald of Monument Securities warns that the data between December and February is often very wide of expectations. Eight minutes until we find out…

9.15am GMT

Tensions in Greece continue to flare

Disabled citizens have gathered outside the main offices of the finance ministry in Athens this morning to protest against reductions to their salaries and pensions imposed as part of a broader government austerity program. Ekathimerini reports:

The union representing the country’s disabled is lobbying the government to provide relief to the retired and working disabled and for guardians of those with heavy disabilities.

Unionists have demanded a meeting with Finance Minister Yannis Stournaras, Labor and Social Insurance Minister Yiannis Vroutsis and others to discuss their grievances.

While Greek students celebrated Valentine’s Day with a protest march last night, demonstrating against reforms to the education system.

And in the country’s second largest city, Thessaloniki, demonstrators gathered to protest against the death of 38-year-old Babakar Ndiaye from Senegal who died after falling from a height of 7m to the train station in Athens while being chased by the municipal police for selling goods in the street.

9.00am GMT

Looking back at yesterday’s figures, Draghi says fourth quarter GDP data was more negative than the ECB expected.

8.53am GMT

Draghi says currency chatter is fruitless

Now it’s ECB chief Mario Draghi’s turn to speak out against currency manipulation. Over in Moscow for the G20, he says:

Currency chatter is inappropriate, fruitless and self-defeating.

He says the ECB mandate is mid-term price stability in both directions.

The exchange rate is not a policy target but it is important for growth and price stability, he adds, noting the fundamental issue at the heart of these discussions.

He too says the euro is not overvalued, saying that nominal and real euro exchange rates are around their long-term averages. He declines to comment on the likely wording of the G20 statement.

He also weighs in on the austerity vs growth debate, saying:

We don’t believe that inflating budget deficits to create demand is sustainable.

No pictures of Draghi in a wooly hat yet, but here’s a reminder of another central bank governor enjoying the snow at the 2010 G7 meeting…

Updated at 8.53am GMT

8.43am GMT

As the meetings and photo shoots of the Group of 20 jamboree begin, there are those that question how useful these events are. Paul Donovan, senior economist at UBS, says:

And so another taxpayer financed weekend minibreak gets underway, as twenty countries fly their officials around the world to have their photograph taken and to issue a pre-agreed communiqué. At a guess the communiqué will say that the G20 likes growth and doesn’t like recessions.

8.28am GMT

Spanish price inflation eases

Spanish inflation eased in January, according to data from the national statistics agency.

CPI rose 2.7% in January, compared with the same month last year, down from 2.9% in December; while the EU-harmonised annual price inflation came in at 2.8%, compared with 3% in December.

8.24am GMT

Portugal eyes full return to bond markets

There’s also some better news out of Portugal, despite the dire GDP figures out yesterday, which showed its economy shrinking by 1.8% in the fourth quarter of 2012. The FT reported last night:

Portugal’s debt agency is confident that the country is poised to regain full access to bond market funding in the next few months and exit its bailout programme, despite its heavy debts and recession-plagued economy.

“I expect we will have full market access in the next few months,” João Moreira Rato, chief executive and chairman of IGCP, the Portuguese treasury and government debt agency, told the Financial Times.

“We are very close to it,” he added. “It looks like everything is moving in the right direction.”

As independent economist Shaun Richards notes, this demonstrates how far removed the financial markets are from reality. He noted the dire economic problems that have been inflicted on Portugal as a result of austerity in his blog yesterday.

Updated at 8.57am GMT

8.19am GMT

Weidmann says ECB won’t target euro

Ahead of the meeting, Germany’s central bank governor Jens Weidmann spoke to Bloomberg. And, of course, the subject of currencies came up.

Weidmann said the euro was not seriously overvalued, and that the ECB would not cut rates just to weaken the euro.

He said ECB chief Mario Draghi was not trying to talk down the euro at the recent press conference. Sticking with the ECB, he said the central bank may be forced to show its hand on the outright monetary transactions bond-buying programme.

He too sees a gradual recovery in the second half.

On Ireland, he said the recent deal to switch a costly promissory note, used to pay for the rescue of failed Anglo Irish Bank, into less expensive sovereign bonds, could breach the ban on monetary state financing.

Finally, he said rumours of his resignation were greatly exaggerated. Keen readers of the blog may remember Twitter erupted with news of Weidmann’s imminent departure last month, only for the Bundesbank to deny it within minutes.

Bloomberg is running both a full story and some key quotes from the interview.

8.01am GMT

G20 currency statement won’t name Japan

Earlier this week, the G7 issued a joint statement reaffirming its “longstanding commitment to market determined exchange rates”. But this show of unity was quickly undermined by off-the-record briefings critical of Japan.

It is thought that G20 hosts Russia would like to echo the thrust of the G7 text when they issue their communique on Saturday, but there will no doubt be substantial wrangling over the wording today and tomorrow.

Russian finance minister Anton Siluanov said yesterday:

The G-20 countries have always held the position that currency policy should be based on market conditions.

Russia has already said that Japan will not be singled out in the text. Siluanov’s deputy, Sergei Storchak – who is Russia’s G20 representative or ‘sherpa’ as they are known – told reporters:

There will be no specific mention of Japan – we are all in the same boat.

7.53am GMT

Good morning and welcome back to our rolling coverage of the eurozone crisis and other global economic events.

Today the finance ministers and bank governors of the Group of 20 nations will start their two day meeting in Moscow in an attempt to reach a common stance on currency manipulation.

Japan will be under pressure for its expansive policies that have driven down the value of the yen. © Guardian News & Media Limited 2010

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