May 2013

In the trading room today: Will the Week ahead Prove Pivotal for the USD and EUR? In preparation for the new trading week which will be filled with important economic data from the U.S. and the euro-zone, we focus on the USD and the EUR and explain why next week could become pivotal for the future direction of these two currency majors, we list the Top 10 spotlight economic events that will move the markets in the week ahead, we examine the consensus forecasts for the upcoming economic data, we analyze the latest trend developments in the EUR/USD currency pair, we note the price correction in the USD/JPY pair, we keep an eye on the strengthening of the GBP vs USD, we highlight the market’s reaction to the bond purchases decision by the Bank of Japan, the Japanese CPI, the German Retail Sales, and the Euro-zone Unemployment Rate, we discuss new forecasts from DZ Bank and UBS, and prepare for the trading session ahead.


USA 

Europe ‘rethinking transaction tax’. Firms more optimistic, EC survey finds. Shares slide in Japan. Spanish economy shrank 2% over last year. US economic growth for the first three months has been revised down slightly, to 2.4% on an annualised basis…


Powered by Guardian.co.ukThis article titled “Japan’s Nikkei tumbles 5%; French jobless total hits new high – as it happened” was written by Graeme Wearden, for theguardian.com on Thursday 30th May 2013 15.28 UTC

7.11pm BST

Closing summary

Time to knock things on the head for another day.

Here's a closing summary:

Japan's Nikkei took another tumble, falling by over 5% as the Tokyo exchange was gripped by another bout of selling. Ministers insisted there was no need for panic, but the drop highlighted concerns that the country's new economic stimulus package may not be working. Highlights from 7.43am onwards.

The French jobless total has hit a new record high, piling more pressure on the Paris government. There are now 3.26m people officially out of work in France, after the total jumped by almost 40,000 in April (see 5.06pm and 6.16pm for details).

Angela Merkel urged France to implement the reforms requested by the European Commission in return for the deficit deadline extension granted yesterday. The comments came at a press conference with Francois Hollande (highlights from 5.37pm).

There was a welcome increase in eurozone economic sentiment. Figures released by the European Commission suggested firms are more optimistic about the crisis, which may increase chances of the recession ending soon (details from 10.09am).

Anger against Europe's financial crisis was on display. There was a general strike in the Basque region of Spain (see here), and a 24-hour walkout on the Lisbon subway (see here).

Europe appears to back away from implementing a financial transaction tax. According to Reuters, officials are working on a watered-down proposals which could costs banks much less (see 1.38pm). Campaigners haven't given up the fight (see 3.38pm).

New economic data from the US showed a rise in the number of people signing on for jobless benefit. Economic growth for the first three months of 2013 was revised down, a little bit. Less chance of the Federal Reserve ending quantitative easing soon? (see 2.05pm).

And John Bon Jovi has revealed he has waived his fee for playing in Spain. Details here.

I'll be back tomorrow. Thanks, as ever, for reading and commenting. Goodnight. GW

Updated at 7.18pm BST

6.38pm BST

Markets calm after Japanese storm

The financial markets remain unspooked by the overnight tumble on the Nikkei.

The main European markets closed higher (only Spain finished narrowly in the red), and on Wall Street the Dow Jones and S&P 500 are both up around 0.5%.

Stock markets closing prices, May 30 2013
Stock markets closing/latest prices. Photograph: /Thomson Reuters

6.28pm BST

The Open Europe thinktank was also watching the press conference, and flags up:

Updated at 6.28pm BST

6.19pm BST

Merkel tells France to reform

Angela Merkel also reminded Francois Hollande that, for all his talk of national sovereignty, he needs to get the French deficit below 3% of GDP.

She told reporters:

We agreed to give France two more years to cut its deficit to 3.0 percent … and coupled with that is the expectation that reforms will be implemented. These go hand in hand.

And that's the end of the press conference (highlights from 5.37pm)

6.16pm BST

A reminder of the jobless crisis in France — there are now more than 3.26 million people officially out of work, after the total rose by almost 40,000, or 1.2%, in April.

There are now 12.5% more jobseekers than in April 2012.

This is a record, according to data which goes back to 1996. The previous record was set in 1997 and broken in March 2013.

6.10pm BST

Here's Hollande's pledge to reverse France's growing jobless total:

Despite this data, despite what it means for many French people individually or for their family, I maintain the goal of reversing the unemployment trend by year-end.

6.03pm BST

Hollande: We will reverse rising unemployment

Francois Hollande says he is committed to "reversing" France's unemployment trend by the end of this year, just an hour after new data showed the jobless total has hit a new high (see 5.06pm).

Asked about the issue, Angela Merkel says that Germany's relatively good jobless rate is due to the "flexibility" of its labour markets (including no minimum wage, as our Europe editor Ian Traynor flagged up here).

5.59pm BST

Francois Hollande has reiterated that France cannot be ordered around by Brussels, a point he made last night after the European Commission released its latest country recommendations.

Asked how this squares with his support for closer economic governance in the eurozone, Hollande explained that the EC gives recommendations, but does not tell states what they must do.

The methods….are the responsibility of France, Hollande told this evening's press conference.

Adding:

The details and procedures…are the responsibility of the government and the state, otherwise there would be no possibility of sovereignty. The Sovereignty must be in the implementation.

(quote via Reuters' Paris bureau, which I've translated)

5.56pm BST

Also.. what would a new, full-time president of the eurogroup mean for Jeroen Dijsselbloem, the Dutch finance minister who took the job at the start of 2013?

Dijsselbloem got off to a shaky start with the bungled Cyprus bailout (for which he took responsibility, although few officials/leaders involved came out of it well). He then caused alarm by indicating that the Cypriot banking levy on wealthy depositors could be a model for the future (and indeed the eurozone is moving towards a bailing-in model for large creditors).

Is he now being shunted aside?

5.44pm BST

France and Germany both back the idea of having a full-time president of the Eurogroup of euro zone finance ministers, President Francois Hollande told the press conference:

On the organisation of economic governance, we are both in agreement that there should be more euro zone summits with a full-time Eurogroup president with reinforced powers who could also be given the mandate, by euro zone ministers, to push for action on employment in industry and research.

More summits, eh? What larks

Updated at 5.47pm BST

5.37pm BST

Merkel-Hollande press conference underway

Angela Merkel and Francois Hollande
Angela Merkel and Francois Hollande Photograph: /N24

German chancellor Angela Merkel and French president Francois Hollande are holding their press conference now (livestream here).

The two leaders appear to be putting on a show of unity, following recent tensions between Europe's two largest countries.

Hollande has told reporters that France and Germany both want funding to be dispensed quickly by Brussels to finance new employment initiatives.

Merkel has said she wants the Growth and Employment pact agreed last summer to be implemented quickly, alongside closer 'economic co-ordination' to improve competitiveness and tackle imbalances in the eurozone.

More to follow

5.06pm BST

French unemployment hits new record high

It's official, the French unemployment crisis has worsened with another 39,800 people registered as jobless in April.

That takes the total out of work to work to 3,264, the highest level since records began in 1996.

Reuters flags up that this is the 53rd month out of 61 in which the jobless total has risen.

4.59pm BST

Photos: Basque general strike

Thousands of people have taken part in a general strike in the Basque area of Spain today, in protest at austerity measures being implemented by national and regional governments.

It was called by the two main Basque unions. There are reports of isolated clashes between protesters and riot police. The ANSA news agency says that eight people were arrested in Pamplona.

These photos show it was well-attended:

Thousands of people take part in a protest during a 24-hour general strike called by the major Basque unions in protest against the spending cuts approved by the Spanish and Basque governments, in San Sebastian, the Basque Country, Spain, 30 May 2013.
Thousands of people take part in a protest in San Sebastian, the Basque Country, Spain, 30 May 2013. Photograph: Javier Etxezarreta/EPA
A demonstrator holds a flag reading in Basque language, 'General Strike, May 30',  during the general strike in  Pamplona, northern Spain on Thursday, May 30, 2013.
A demonstrator holds a flag reading in Basque language, ‘General Strike, May 30′, during the general strike in Pamplona. Photograph: Alvaro Barrientos/AP
-- A man walks next to the Banco Sabadell, with graffiti: Today all the streets to fight and thieves.
A man walks next to the Banco Sabadell, with graffiti that reads: “Today all the streets to fight and thieves”. Photograph: Javi Julio/Demotix/Corbis
Members of union picket lines protest with Basque policemen at the entrance of a shopping mall during a regional strike called by the main Basque unions in the northern Spanish Basque city of Bilbao, on May 30, 2013.
Members of union picket lines protest in front of Basque policemen at the entrance of a shopping mall in the northern Spanish Basque city of Bilbao today. Photograph: RAFA RIVAS/AFP/Getty Images

4.50pm BST

Heads-up: Angela Merkel and Francois Hollande are holding a joint press-conference shortly. It'll be streamed here.

Updated at 4.53pm BST

4.28pm BST

The view from Athens

Over in Greece our correspondent Helena Smith reports that the jobs figures keep getting worse:

In what must be one of the most dispiriting set of figures released since the start of the euro crisis, a poll commissioned by Athens University shows that Greeks are not only not buying into the official optimism the coalition government has made a point of drumming home but are fast falling into deep despair.

Three out of ten Greeks (29.9%) are actually in paid, permanent work at present*, according to Opinion Poll which conducted the survey with one out of two Greeks saying their desire is to work abroad.

* – rather than, say, studying or in temporary work, or between jobs….

With the official unemployment rate now at a euro zone record of 27%, those who do have jobs are not hopeful either with six out of ten telling pollsters they fear they won’t have work for long. A whopping 85.39% said they were vehemently opposed to the policies being pursued by Europe with 70.76% saying they did not think the European Union would resolve the crisis in the next two years. In another sign of bleakness, the vast majority blamed the unprecedented levels of joblessness, especially among the young who have been hardest hit, on immigrants. 

The poll was released as Greece’s finance minister, Yannis Stournaras, rejected an OECD forecast that Greece was headed for a seventh year of recession.

The Paris-based organization predicted yesteday that the Greek economy would contract by 4.8 percent this year and 1.2 percent in 2014. “We disagree with that figure,” said Stournaras. The European Commission and the International Monetary Fund also disagree with it. I believe this will be proven wrong and we will be right, as I believe that the GDP will be just under plus 1 percent,” he told reporters in Paris. 

In line with sentiment on the ground, the OECD forecast that unemployment would also rise next year to 28.4%. Ever the eternal optimist, Stounaras added that Athens would proceed with its first, if small, bond issue next year.

Updated at 7.16pm BST

3.59pm BST

There's a rumour swirling that the French unemployment data has leaked, and that the figures are another dose of bad news for president Hollande.

Les Echos, the French news paper, is reporting that the number of registered jobseekers rose by about 40,000 in April, on top of March's record high. Here's their story.

We'll find out at 5pm….

3.38pm BST

Robin Hood campaign: we need the FTT

Campaigners for a Financial Transaction Tax have responded to today's reports that Europe is rowing back on its plans to impose the levy.

David Hillman, spokesperson for the Robin Hood Tax campaign, said he was hopeful that the FTT would not be scaled back:

It is true that countries are debating the details of the tax but our understanding is there remains a firm intention to agree a strong FTT that will be popular with the public and raise tens of billions from the banking industry.

That is why the banks are lobbying so hard – precisely because they know they will soon be paying it. And if the FTT works well in Europe, it will be harder for them to argue against paying their fair share here.

This tax must be implemented in full – it's time the special privilege of the financial sector, which has cost the rest of society so dear, is brought to an end.

As reported at 1.38pm, officials have told Reuters that the FTT could be watered down to just 0.01% of a trade's value, from a previous plan of 0.1%. The rethink, following lobbying and legal action, could also see the tax only imposed on shares at first.

3.27pm BST

Falling Irish unemployment welcomed

The news that Ireland's unemployment rate has fallen to 13.7% (see 11.11am) is being hailed as a chink of light for the country's economy, reports Henry McDonald in Dublin:

He writes:

One of the two ruling parties in the Dublin coalition, Fine Gael, has claimed the drop in unemployment showed that the government's strategy of generating jobs is bearing fruit.

Fine Gael TD Damien English welcomed the CSO figures which report the first drop in Irish unemployment in three years.

He said: “Taking a closer look at today’s figures from the CSO reveals some encouraging trends. Not only has unemployment dipped below 14% for the first time in three years, we are also making progress in tackling the long-term unemployment rate, which has remained stubbornly high.

“About two-thirds of those who are out of work are long-term unemployed, and helping these people re-enter the workforce is crucial if we want to get on top of this crippling problem. The long-term unemployment rate has fallen by almost 1% over the last year. Of course, it remains far too high, but it is encouraging that we are moving in the right direction.

2.59pm BST

Heads-up: Dutch finance minister Jeroen Dijsselbloem, who also chairs the eurogroup, is visiting Greece tomorrow.

Dijsselbloem will hold talks with his Greek counterpart, Yannis Stournaras, from 3pm local time (1pm BST), followed by a press conference.

Suspect we'll hear more about how Greece is fighting its way through the crisis (today's rise in economic sentiment could be cited).

If so, we shouldn't forget that unemployment is at record high, and the economy's shrunk by around 20% since the ongoing recession started.

2.46pm BST

Wall Street opens

After the drama of Tokyo, we have torpor on Wall Street where the Dow Jones has risen by a paltry 0.1% in early trading, matching the FTSE 100.

Things are a little brighter in Europe, with the German DAX and French CAC both up around 0.5%. Pretty calm, though, after the Nikkei's decline.

Updated at 2.46pm BST

2.29pm BST

The small downward revision to US GDP is nothing to worry about, argues Paul Ashworth, chief US economist at Capital Economics.

He points out that drop was partly due to larger drop in government spending (knocking 1% off GDP, not 0.8%)

The fiscal squeeze will continue for the rest of this year, but should begin to ease off after that.

He adds that the private sector appears to be doing well:

Consumption growth is now estimated to have accelerated to 3.4% annualised in the first quarter, up from the initial estimate of a 3.2% gain. This is even more impressive given the expiry of the payroll tax cut at the end of last year. Real personal disposable incomes are now estimated to have fallen by a massive 8.4% in the first quarter, reversing an 8.9% jump in the final quarter of last year, which reflected a surge in bonuses and dividends paid earlier to avoid those higher taxes.

As a result, the saving rate slumped to only 2.3%. Otherwise, the positive contribution to first quarter GDP growth from inventories was lowered, while the drag from net external trade was also assumed to be smaller. These two changes largely offset each other.

This graph from Zerohedge shows the details (first estimate on the left, and today's final reading on the right)

US GDP Q1 2013, revised
.
US GDP code
Photograph: Zerohedge

2.05pm BST

US data disappoints

Two pieces of weaker-than-expected US data have been released, suggesting America's economy may not be as vibrant as thought.

1) The weekly jobless claims data showed that 354,000 people signed on for unemployment benefit for the first time last week, up from 344,00 the previous seven days.

The number of people filing 'continued claims' also rose, to 2.986m, having dropped below the three million mark last week for the time since March 2008.

2) US economic growth for the first three months has been revised down slightly, to 2.4% on an annualised basis (ie, 0.6% quarter-on-quarter), from 2.5%.

The figures are surprising, given how much American data has beaten forecasts in recent days (consumer confidence, house prices and manufacturing output have all been more decent than expected)

That may mean the Federal Reserve doesn't begin slowing, or 'tapering', its electronic money-printing operation soon, suggests Mike van Dulken of Accendo Markets:

Updated at 2.08pm BST

1.38pm BST

Europe to ‘scale back Financial Transaction Tax’

The City of London.
The City of London. Photograph: Grant Smith/Alamy

Reuters is reporting that European officials are planning to scale back their proposed financial transactions tax drastically, following lobbying from the banking sector and a legal challenge from the UK.

Under the new proposal, the FTT would be rolled out more slowly, and would only raise one-tenth as much as previously expected.

The changes on the table, which aren't yet agreed, would cut the levy on transactions to just 0.01% of the value of a deal, from 0.1%.

Officials are also planning to simply impose the charge on shares, initially, and only extend it to other products such as derivatives once they've established the impact of the FTT.

One official explained:

The whole thing will have to be changed quite a lot…

It is not going to survive in its current form.

adding:

You can introduce it on a staggered basis.

We start with the lowest rate of tax and increase it bit by bit.

The full story is here: Exclusive – Europe plans major scaling back of financial trading tax

Brussels had hoped that the FTT would raise significant funds to fix some of the damage cause by the financial crisis.

It was based on work by economist James Tobin in the 1970s. He famously spoke of throwing sand into the wheels of the financial system, making short-term trading less lucrative while having little impact on buy-and-hold investing.

It was picked up by the Robin Hood movement, who hoped to use it to raise funds for development work, before Brussels saw how they, too, could implement it. In January, 11 countries agreed to bring it in.

But it was very unpopular with the City. Even though the UK isn't implementing the FTT, it would hit firms when they traded with European banks.

The British government launched a legal challenge to the plan in April. And last week the Bank of England governor, Sir Mervyn King, attacked the FTT and claimed that he couldn't find anyone in the world of European central banks who supported the idea.

Of course, nothing is official yet, as Reuters explains:

Any final decision is up to the countries that have signed up and remains months away. 

Germany, for example, is unlikely to back any scaling down of the levy in public before elections in September, because Chancellor Angela Merkel's coalition has committed itself to the voter-friendly tax.

1.05pm BST

Meanwhile, back in Japan…

A report that Japan's public pension fund may pile more funds into the stock market has sparked a wild swing in the futures market.

Hours after today's 5% slide (see opening post onwards), Reuters reported that the Government Pension Investment Fund (GPIF), which manages some trn, is considering changing its potential risk and return rules on assets to give it more flexibility.

Otherwise, the report claims, GPIF might have to buy more Japanese bonds and sell shares.

It's attributed to an unnamed source, who reckons the move could be anounced within a month, and it's enough to send traders pushing up the Nikkei futures price. That now suggests the index could jump by 400 points tomorrow morning, having lost 737 today.

Nikkei futures price, May 30th
Photograph: InFront (with thanks to @finansakrobat )

It's also pushing shares up in London, with the FTSE 100 up 25 points now at 6651.

Updated at 1.05pm BST

12.15pm BST

Subway workers strike in Lisbon


A woman reads a sign saying: “The subway is closed due to the strike”. Photograph: Francisco Seco/AP

Subway staff in Lisbon are holding a 24-hour walkout in protest at the country's austerity programme, causing traffic snarl-ups in the Portuguese capital.

The strike was organised by unions to show their opposition to welfare cutbacks, and labour market reforms, which are part of Portugal's €78bn bailout deal.

The Metropolitano de Lisboa, which normally carries half-million passengers a day, is at a stand-still, according to the Portugal News. The disruption began late on Wednesday and is expected to continue until Friday morning.

Union leader Anabela Carvalheira told the Lusa news agency that the numbers of strikers “is good”, adding:

So far there are no workers on the trains, in the stations or at the workshops.

Commuters queue for a bus during a 24-hour subway workers strike, Lisbon, Thursday, May 30, 2013.
Commuters queue for a bus during a 24-hour subway workers strike. Photograph: Francisco Seco/AP

AP has more details about the strike.

The protest comes ahead of a spate of strikes by government workers and employees of public companies in coming weeks, including a planned walkout by teachers during the period of high-school summer exams.
The country's two trade union confederations, representing more than 1 million mostly blue-collar workers, are also considering rare joint protests.

Commuters walk along Comercio square during a 24-hour subway workers strike, Lisbon, Thursday, May 30, 2013.
Commuters walk along Comercio square in Lisbon today. Photograph: Francisco Seco/AP

11.19am BST

Today's fall in Irish unemployment was due to a 24,200 rise in the number of people in part-time employment unemployment. The total in full-time work fell, though, by 3,700.

Updated at 4.41pm BST

11.11am BST

Irish unemployment data released

Ireland's unemployment rate has fallen this year, but remains painfully high, data just released shows.

The seasonally-adjusted jobless rate dropped to 13.7% in the first quarter of 2013, down from 14.1% in the last three months of 2012 (Reuters reports).

It's the first time the seasonally-adjusted rate has been below 14% in two years.

This comes a day after the OECD said Ireland must implement "decisive labour-market reforms" to help people, especially the young, into work.

Updated at 11.18am BST

11.07am BST

David Jones of IG Index cautions against over-hyping today's 5% fall on the Nikkei today.

Updated at 11.26am BST

10.57am BST

Howard Archer of IHS Global Insight is also cheered by today's rise in eurozone confidence, but agrees that the situation is still weak:

Following on from modestly improved purchasing managers surveys for May, a limited overall pick up in economic sentiment supports hopes that Eurozone economic activity is inching towards stabilization in the second quarter after contracting for a sixth successive quarter in the first quarter of 2013. However, sentiment is still pretty muted and fragile, and the situation varies markedly between countries. If the Eurozone does finally manage to stop contracting overall in the second quarter, it is likely to be heavily dependent on clear growth in Germany.

If the trend continues, he adds, then firms should pare back their job cutting and consumers could start spending a little more (aided by the fact that inflation in the eurozone has been falling.

10.47am BST

Eurozone confidence rises – early reaction

Eurozone consumer confidence, to May 30 2013
Economic sentiment in the eurozone and EU. Photograph: European Commission

Hopes that the eurozone could exit recession before Christmas have been bolstered by today's rise in eurozone economic confidence (see 10.03am), suggests Martin van Vliet, economist at ING.

However, the underlying pictures remains troubling – Europe is not out of its economic crisis yet.

Van Vliet explains:

With economic sentiment across the Eurozone starting to turn up again, hopes will be rising that the Eurozone could exit recession in the second half of this year.

But we shouldn’t get overexcited here. With more fiscal austerity in the pipeline – slower austerity still is austerity –, unemployment elevated and still rising and, in some cases, still weakening housing markets, consumers and businesses have plenty of reason to remain worried. So while it is encouraging to see that confidence is again moving in the right direction, there remains a long way before confidence is restored. Any nascent economic recovery later this year is therefore likely to be slow, and will probably be largely confided to the “core” countries.

And today's data also showed an increase in sentiment in Greece, after many dark months:

Updated at 11.00am BST

10.09am BST

Economic outlook may be getting brighter…

Confidence improved across the eurozone's five largest economies – Germany, France, Italy, Spain and the Netherlands – according to the European Commission's new survey (see 10.03am).

Service sector companies and manufacturers both reported that the economic climate has picked up.

• Services sentiment: -9.3, up from -11.1 in April

• Industrial climate: -13.0, up from -13.8 in April

The Commission said that industrial firms were reporting healthier order books, suggesting better economic times in the months ahead.

10.03am BST

Eurozone sentiment improves

Just in: eurozone citizens and businesses are more confident about economic prospects than a month ago.

The European Commission's monthly survey found that economic sentiment has risen to 89.4 this month, up from 88.6 in April.

And consumer confidence is up too, at -21.9 from -22.3. Still deeply into negative territory, though, but it's getting better.

Updated at 10.04am BST

9.59am BST

A special adviser to Japanese PM Abe has apparently said that today's 5% tumble on the Nikkei isn't a cause for alarm, because it's natural for shares to move randomly.

Reuters' Tokyo bureau has the details:

The recent volatility in the Japanese stock market is not surprising as it is natural for stock prices to move randomly, Koichi Hamada, a special economic adviser to Prime Minister Shinzo Abe said on Thursday.

Hamada, speaking to reporters, also said he is not worried about the rise in Japan's long-term yield as real interest rates remain low.

Am not sure that the 'random walk theory' is completely applicable in a situation where a country is attempting an unprecedented stimulus package, at a time of global unease over monetary policy….

9.40am BST

Germany’s eurosceptic leader: I could work with Merkel


Bernd Lucke, co-founder of Germany’s anti-euro party “Alternative fuer Deutschland”. Photograph: KAI PFAFFENBACH/REUTERS

The leader of Germany's new anti-euro party has told Reuters that he could work with Angela Merkel's party following this autumn's elections, as long as she agrees to take a harder line on aid to struggling euro zone members.

The comments may cause some concern in the eurozone periphery, although it's not clear that Alternative For Deutschland will attract enough votes to secure seats in the German parliament.

Bernd Lucke, founder of AfD, told Reuters that he could drop his demand that Germany withdraws from the eurozone, if Merkel agreed to be tougher:

Lucke, a macroeconomics professor, explained:

I could imagine cooperating with a centre-right government if this coalition was prepared to accept significantly tougher conditions on aid from the ESM [the eurozone bailout fund].

In other words, only paying out aid tranches when bailed out countries really fulfil their obligations. At the moment, when a country like Greece or Portugal fails to meet the criteria, they receive aid regardless, because we are told they made a decent effort.

The full interview is online here.

Lucke's comments come at a time when Europe appears to be moving away from hard-line tactics and towards a push for growth. On Monday, Spiegel reported that Merkel's government was ready to "gamble" on new stimulus measures to help Southern Europe (more here)

8.55am BST

Bon Jovi waives fee for Spanish gig

Jon Bon Jovi performs on stage at Munich Olympiastadion on May 18, 2013 in Munich, Germany.
Jon Bon Jovi performing on stage at Munich Olympiastadion earlier this month. Photograph: Stefan M. Prager/Redferns via Getty Images

US rock star Jon Bon Jovi has revealed he is playing a concert in Spain for free next month, meaning cheaper tickets for fans who have suffered from the country's economic trauma.

Bon Jovi told Spanish newspaper El Mundo that he wanted to give something back to Spain, after realising that many citizens wouldn't be able to afford the experience.

He explained:

When we started planning our tour for our album, 'What about now', we did a study and found that, due to the economic situation, Spain wouldn't be on the roadmap

However, we didn't want to ditch the fans of a country I love and has treated me so well for 30 years.

The gig takes place at the Vicente Calderon stadium on 29 June, and is already sold out. Tickets were priced at between €18 and €39, with proceeds going to cover venue costs and staff wages.

A ticket for Bon Jovi's gig in Manchester, next month. will cost you around £95 (€111), (based on a quick search this morning).

The 51-year old musician can take the financial hit, given his estimated net worth of 5m. Still, it's an encouraging response to Europe's woes — given some rock bands had considered touring elsewhere instead for fear of not being paid.

Updated at 9.00am BST

8.34am BST

No panic in Europe's stock markets, where the FTSE 100 is up 10 points in early trading. That's partly because the blue-chip index got its retaliation in first, dropping 2% last night.

David Buik of Cantor Index comments:

This morning we had expected a dead-cat-bounce, but it was not to be thanks to the Nikkei falling 5.15% today thanks to a strong Yen and lower export forecasts.

8.20am BST

Spain’s economy shrank 0.5% in Q1

Over to the eurozone, and confirmation that the Spanish economy continued to shrink steadily this year.

Final GDP data, just released, showed that Spain's economic output dropped by 0.5% in the first three months of 2013, and was 2% smaller than a year ago. That's in line with the initial estimate, and shows the economy has been in recession for the last seven quarters.

It also reinforces the need to give Spain two more years to lower its deficit to 3% of GDP – a decision announced yesterday by the European Commission.

8.09am BST

Economics minister: We aren’t anxious about the markets

Japanese economics minister Akira Amari has insisted that the country's government will not be blown off course by events in the stock market.

Reuters has the details:

Amari said the Bank of Japan is taking appropriate actions to seek stability in the Japanese government bond market through communication with market participants.

Amari, speaking at an international conference held in Tokyo, also said that the government continues to closely monitor the market for its ability to digest JGBs.

He repeated that the government will pursue economic policies without feeling anxiety about the recent volatile movement in stock markets.

Japanese government bonds have risen in value this morning, which lowered the yield (the effective interest rate) on its 10-year debt at 0.89%.

There was alarm this week when this yield hit 1%, as it suggested traders were losing faith in 'Abemonics' and ditching the country's debt. Yields are still up sharply since the start of April:

Updated at 8.11am BST

7.59am BST

Fed fears

Today's 5% slide on the Nikkei is also due to concern that the US Federal Reserve will begin the process of slowing, or 'tapering', its own stimulus package soon.

One hedge fund manager told Reuters that Fed fears are a bigger factor than the rising yen (which is up around 0.5% at ¥100.6 to the US dollar):

The rising yen is just a minor reason that triggered further selling. The fundamental concern that's been in investors' heads is the possibility that the Fed is exiting from quantitative easing.

And here's a list of the biggest fallers in the Nikkei today:

Biggest fallers on the Nikkei, May 30 2013
Photograph: Thomson Reuters

7.43am BST

Japanese stock market falls again

Good morning, and welcome to our rolling coverage of events across the eurozone and the world economy.

Japan's stock market has tumbled again, as fears over the country's stimulus package and the hit shares in Tokyo.

The Nikkei slid by nearly 5.2% in a nervy day's trading, prompting the country's finance minister to urge people not to overreact. All but two of the 225 shares in the benchmark index fell.

The Nikkei lost 737 points to finish at a five-week low of 13,589, meaning it has lost 14% since its 'intraday' peak last Wednesday. This puts the index in 'correction territory' (defined as a drop of 10% or more), although it's still up by a third this year.

Japan's Nikkei, 3 months to May 30
The Nikkei over the last three months. Photograph: Thomson Reuters

Exporters led the selloff, with Fast Retailing – Asia's largest clothes vendor – sliding by 11.11%. The yen rose against the US dollar, raising concerns that Japanese firms will find it harder to sell abroad.

Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments, told Bloomberg:

Selling is feeding into more selling.

It’s mind-boggling that this market, which is one of the most liquid in the world, can move so much in one day like this.

Traders also blamed nervousness over the prospects for the Japanese economy. Economic data due out tomorrow will show whether prime minister Shinzo Abe's stimulus package is succeeding in stimulating growth.

More reaction to follow, along with rolling coverage of other events through the day…..

Updated at 7.50am BST

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Published via the Guardian News Feed plugin for WordPress.

Highlights of the EC’s annual budget review. Barroso: We need growth and reforms. France urged to fix its competitiveness, while Germany told to let wages rise. Italian PM: we can be proud. Bank of Canada leaves rates unchanged…

 


Powered by Guardian.co.ukThis article titled “France and Spain win more time to cut deficits as Europe puts growth over austerity – as it happened” was written by Graeme Wearden, for theguardian.com on Wednesday 29th May 2013 18.02 UTC

6.59pm BST

Closing summary

That's all for today, after quite a busy session.

Here's a very brief closing summary.

The European Commission has given seven countries more time to hit their budget targets, as it urged member states to back a new push on structural reform and growth.

Spain, France, Poland and Slovenia get another two years, while a 12-month extension was handed to the Netherlands, Portugal, and Belgium (which also avoided being fined despite failing to address its budget deficit).

Highlights from 1.12pm

Summary of the key points here

Analysis here

Early reaction here

The OECD has lowered its growth forecasts for the world economy. In its latest economic update, the Paris-based organisation expressed particular concern about the eurozone – urging the European Central Bank to consider embarkin on quantitative easing. Highlights from 10.12am.

World markets fell, with the FTSE 100 dropping almost 2%. Closing prices here, and reaction at 5.25pm.

The day began with the IMF lowering its growth forecast for China. See 7.52am.

And ended with a successful-looking auction of US debt. See 6.29pm

And also saw Spanish firemen clash with riot police in Barcelona. See 5.58pm

In Greece, the Pasok party was hit by another defection. See 4.16pm

While the German jobless rate remained at 6.9%, despite rising by 21,000 on a seasonally adjusted basis. See 9.12am onwards.

Thanks, as ever, and goodnight. GW

Updated at 7.02pm BST

6.40pm BST

France's president, Francois Hollande, has denied that Brussels can order Paris around, following the recommendations on labour and pension reform announced by the EC today.

AFP newswire reports that Hollande has said:

The [European] Commission doesn't have to dictate to France what it has to do. It simply has to say that France must restore its public accounts.

6.29pm BST

The US government's much-anticipated auction of bn of five-year bonds appears to have gone smoothly.

The debt was all sold at yields of up to 1.045%, which Reuters says was in line with market expectations. The bid-to-cover ratio was 2.79, which means total bids were almost three times as large as the amount of debt on offer.

And US 10-year Treasury bills are rising in value since the auction results hit the newswires – suggesting it has been well received.

Updated at 6.30pm BST

5.58pm BST

Photos: Spanish firemen protest

Just in – photos of a protest by Spanish fireman in Barcelona against the government's spending cuts, which cuminated in clashes with riot police outside the Catalan parliament:

Firemen march against sector budget cuts carried on by Catalonia Government
Photograph: Lino De Vallier/Demotix/Corbis
Firemen burned coffins that symbolized the death of the public services due to austerity measures in front of the Catalonia Parliament.
Firemen burned coffins that symbolized the death of the public services due to austerity measures in front of the Catalonia Parliament. Photograph: Lino De Vallier/Demotix/Corbis
Riot police try to stop the entrance to the Catalonia Parliament at firemen protesting for sector budget cut in Barcelona.
The rally ended in front of the Catalonia Parliament with clashes with riot police. Photograph: Lino De Vallier/Demotix/Corbis

Updated at 6.00pm BST

5.25pm BST

What the analysts say

Here's some analyst reaction to today's heavy falls on Europe's stock markets (see 4.49pm for the closing prices)

Michael Hewson of CMC Markets: ToTo is the new RoRo

In an almost complete reversal of yesterday’s price action the bears have reasserted themselves today, overturning the brief return to optimism as European equity markets slide back sharply on the back of rising bond yields.

The yield on US treasuries rose to its highest level in 12 months on growing concerns that the Fed could well be getting nearer to the point of a possible paring back in its current asset purchase program.

Instead of the usual “risk on, risk off” scenario (RoRo), we’ve become used to, now we have to contend with the new “taper on, taper off” scenario or (ToTo) which is likely to dominate market sentiment until the next Fed meeting on June 18th and 19th, and even possibly beyond that.

This concern saw Europe’s markets open lower this morning, and the declines had further fuel added to the fire by the OECD who in their latest assessment of the global economy revised their outlook down again, this time from 3.4% to 3.1% on a global basis.

The reductions in Europe were even deeper with a revision of EU GDP down from a contraction of 0.1% to a contraction of 0.6%, while France’s GDP target was slashed as well from 0.3% to -0.3%.

The OECD also voiced its concern that without some form of QE in Europe and negative deposit rates we could well see further forecast reductions in the coming months.

Retailers have also taken a hit after CBI retail sales plunged the most in 16 months in May. (details at 11.27am). It seems higher energy prices and below inflation wage growth along with tax changes in the new tax year have constrained consumer spending.

Yusuf Heusen of IG: is the market coming or going?

Once again the uptrend is looking under threat.

Yesterday’s impressive gains are a distant memory as the FTSE gives up the ground gained on Tuesday and back to levels seen last Thursday. It’s been a while since we’ve seen such volatility in both directions, which is at least a welcome reminder that markets can go down as well as up, but two consecutive triple-digit days suggests a market that doesn’t know whether it’s coming or going. Too many had probably forgotten that universal truth in the steady run higher this year.

A warning from the OECD about the negative impact of the end of QE on global growth prospects has reignited fears that any reduction in easing will bring the global party to a halt.

Such fears are understandable, but perhaps overdone; having seen the turmoil caused by even hinting at a reduction in QE, Ben Bernanke is going to tiptoe very carefully into this area

Updated at 5.25pm BST

5.01pm BST

Spain's slow struggle to emerge from a toxic mix of high unemployment, recession and swollen budget deficits looks set to take even longer than expected after both Brussels and the OECD changed their tunes on the country's future.

Our Madrid correspondent, Giles Tremlett, explains:

The OECD foresees the economy shrinking a further 1.7 percent this year, while growth of just 0.4 percent in 2014 will not create jobs – with growth now the major concern, ahead of the deficit.

It sees Spain's deficit barely shifting next year, with a drop from 7% to 6.9% of GDP, while unemployment is set to rise to 28%.

Brussels has also heard the warning bells and turned away from strict austerity, changing the country's deficit target to 6.5% of GDP from the previous 4.5%.

Even reaching this target, however, will require fresh measures – with Brussels demanding further tax hikes, more labour reform and a radical change in the way Spain calculates its pension payments.

These will have to be linked to the long-term sustainability of the pension system in an ageing population rather to inflation. The expected result is for pensions to fall in real terms.

Updated at 6.04pm BST

4.49pm BST

European markets slide

A gloomy day in Europe's stock markets has ended with heavy falls on the major exchanges.

In London the FTSE 100 has dropped almost 2%, down 134 points at 6627, with 98 shares falling (utility firms National Grid and United Utilities both fell 5%).

Here's a picture of the damage, including the latest prices from Wall Street.

Equity markets, at European close, May 29 2013
Photograph: /Thomson Reuters

As Brenda Kelly of IG explained at lunchtime (see 12.37pm), shares have been hit by several factors – including this morning's downgraded OECD forecasts, fresh fears that the Federal Reserve might tighten its QE programme, predictions that the Japanese Nikkei will fall tomorrow, and a bout of profit taking after the recent rally.

More reaction to follow….

4.30pm BST

ECB: Banks still face stability risks

The European Central Bank is warning this afternoon that Europe's banks to be further strengthened.

The ECB's six-monthly review of the eurozone financial sector warned that it is still fragile, and that stresses in the 'real economy' could easily cause new problems:

Here's the four main risks to stability (via Reuters):

  1. Further decline in bank profitability, linked to credit losses and a weak macroeconomic environment
  2. Renewed tensions in sovereign debt markets due to low growth and slow reform implementation
  3. Bank funding challenges in stressed countries
  4. Reassessment of risk premia in global markets, following a prolonged period of safe-haven flows and search for yield

Quite a wide-ranging set of threats — particularly as the eurozone economy continues to contract.

Vitor Constancio, the ECB's vice-president, told reporters:

Financial stability has improved but remains fragile … due to weak growth and banking sector vulnerabilities.

There is this disconnect between the significant improvements in financial markets in general and the real economy – and the situation in the real economy is affecting banks….So this is a cause of concern.

4.16pm BST

MEP’s defection leaves Greece’s Pasok party on the ropes

Over in Greece our correspondent Helena Smith reports that the formerly all-powerful socialist Pasok party has suffered yet another defection over government economic policies.

She writes:

If ever proof was needed that the once mighty socialist Pasok is imploding at an alarming rate, it came today when the prominent euro MP Kriton Arsenis also threw in the towel prompting a furious reaction from the party.

In an incendiary letter to party chief Evangelos Venizelos, the MEP said he had decided to become an independent because that way he could best continue the fight against the “irrational and destructive policy of unilateral austerity in Europe and Greece.”

A former green activist, Arsenis wrote that he was vehemently opposed to the privatization program ordered by the country’s troika of creditors at the EU, ECB and IMF and sale of “profitable” public utilities and sate-owned land which Pasok has endorsed as a partner in prime minister Antonis Samaras’ tri-partite coalition.

PASOK party leader Evangelos Venizelos (C) leaves the Prime Minister's office after a meeting in Athens, Greece, 27 May 2013.PANTZARTZI
PASOK party leader Evangelos Venizelos, pictured on Tuesday night.Photograph: SIMELA PANTZARTZI/EPA

Arsenis's defection – on the heels of last week’s decision by former EU commissioner and stalwart party cadre Anna Diamantopoulou to also break ranks — appears to have unleashed a massive row with the party demanding this afternoon that Arsenis return the seat. 

Helena explains:

In a withering statement, Fofi Gennimata, Pasok’s spokeswoman, said it was now up to Arsenis, who was appointed to the parliament by Venizelos’ predecessor George Papandreou, to do the “decent” thing. “He was not elected himself but appointed by the previous president of Pasok. This position belongs to the party. The euro parliamentarian post belongs to Pasok,” she told a local radio station. “So whoever does not wish to have anything to do with Pasok … I think must first leave that position and then make clear their objections which we can then talk about.”

Earlier this week Thanassis Ikonomou, another MP, also defected to the left-wing Dimar, saying “for a long time now Pasok has lost all its personality and identity.” 

The party’s free fall has become a major headache for the pro-bailout Samaras alliance with analysts fearing it could further weaken a coalition already combatting daily (if abated) anger over austerity measures.

Updated at 4.16pm BST

4.04pm BST

We shouldn't get carried away with suggestions that Europe is abandoning austerity altogether.

Even though Spain, France, Portugal, Poland, the Netherlands and Slovenia are getting up to two years more time to lower their deficits, Brussels is still pushing for some of its favourite measures including labour market reforms, welfare adjustments and (although slower) fiscal consolidation.

Open Europe, the think tank, has rounded up some of the key recommendations, and concludes:

For all the talk of this being the ‘end of austerity’ or ‘austerity in retreat’, is much really changing? Sure, there is some tinkering with timelines for deficit reduction (Spain, France and others have been given more time to cut public deficit), but ultimately the eurozone is still going along the same policy path – just slightly more slowly.

It adds that structural reform, welfare reform, fiscal consolidation economic liberalisation are all necessary, but adds:

The question remains whether they can all be done at the same time by a group of countries which are closely interlinked, and many of which are currently in recession.

And as an example, here's France's to-do list:

  • France should do more to cut labour costs, in particular by reducing social security contributions for employers.
  • The European Commission says France should adopt new measures by the end of the year to “bring its pension system into balance in a sustainable manner no later than 2020.” 
  • France should improve the business environment and help its firms become more competitive;
  • France’s unemployment benefit system should be “urgently” reformed, so that it is sustainable but also “provides adequate incentives to return to work”.
  • France should do more to tackle labour market segmentation, and remove “unjustified restrictions in the access to and exercise of professional services.”

More here: Despite much fanfare, the European Commission recommends much of the same for the eurozone

Updated at 4.04pm BST

3.35pm BST

Video: OECD chides eurozone for lagging behind

The OECD underlined the challenges facing the eurozone today, when it slashed its forecast for 2013 to a 0.6% drop in GDP. 

Here's a video clip of Pier Carlo Padoan, chief economist, explaining why Europe is lagging:

(if you scroll back to 10.12am there are details of the OECD's new forecasts, in which it predicted slower growth across the world economy).

3.27pm BST

Central bank news – Canada left rates unchanged at 1% at its monetary policy meeting today (quite a rarity, with so many choosing to ease borrowing costs in recent weeks).

Here's the statement from the Bank of Canada, which includes this assessment of the world economy:

In the United States, the economic expansion is progressing at a modest pace, with continued strengthening in private demand partly offset by fiscal consolidation.

Japan’s economy is beginning to respond to significant policy stimulus. Europe, in contrast, remains in recession. Growth in China has continued to ease from very strong rates, weighing somewhat on global commodity prices.

The Bank continues to expect global economic activity to grow modestly in 2013 before strengthening over the following two years.

Updated at 3.28pm BST

3.16pm BST

Italian government: we can be proud

Italy's new prime minister, Enrico Letta, has declared that the Italian people can be "proud" of the news that the country has been removed from the EC's excessive deficit list:

Our Rome correspondent, Lizzy Davies, reports that Letta also paid tribute to the efforts of his predecessor, Mario Monti, who suffered a bruising rebuff from the electorate in February's general election.

News from Brussels is not generally something to celebrate for the Italians, so the European Commission's announcement today that it is recommending the abrogation of the eurozone's third-largest economy from its Excessive Deficit Procedure (EDP) has understandably been welcomed in Rome.

In a statement on the Italian government's website, prime minister Enrico Letta said the move was "cause for great satisfaction" and something of which the Italian people should be "proud". 

The new premier, whose fragile grand coalition government was sworn in just a month ago, said Italy was now "reaping the rewards" of the previous technocratic government, which pushed the country through a series of punishing austerity measures. He expressed his "personal gratitude" to Mario Monti, and affirmed his own government's intention to stick to fiscal goals set down by Brussels. 

The move, which had been long anticipated but confirmed only this afternoon, has been hailed in the Italian media as a "shot of oxygen" for the new government. It is estimated that it will free up around €8bn of public money which would have gone on getting its annual borrowing down under the EDP. 

However Letta has been careful not to raise expectations, reportedly saying earlier this week that the benefits would only been seen on next year's budget. 

He was quoted in the Italian press as telling a meeting of regional governors: "As we know, it will not free up resources immediately."

Updated at 3.16pm BST

3.08pm BST

Mariano Rajoy, Spain's prime minister, has welcomed the confirmation of a two-year extension to bring its deficit below 3%. He declaried it as a sign that austerity is moving off the agenda, flags up journalist José Miguel Sardo:

Updated at 3.09pm BST

3.05pm BST

3.03pm BST

EC’s Slovenian worries

Another point to flag up from the EC's recommendations today – it is worried about the Slovenian banking system.

Its nine recommendations for Slovenia include this ominous warning:

Slovenia should arrange an independent review of the entire system, stand ready to re-capitalise further banks, if necessary, and adopt a comprehensive banking sector strategy.

and also:

Linked to the recommendation above, Slovenia should also review the supervision of the banking sector and act to strengthen its capacity and transparency.

Slovenia is already battling to avoid being forced to take a bailout, primarily due to the problems in its mainly state-owned banking sector.

(hat-tip to fastFT, who have more details on their new site)

2.44pm BST

Summary: what the EC has done:

A quick summary of the main decisions from the European Commission:

• Six countries have been given more time to bring their deficits under 3% of GDP: Spain, France, Poland and Slovenia get two more years, while the Netherlands and Portugal get a year each.

• Belgium has also been given another 12 months to correct its deficit, but will not be fined despite the lack of any 'effective action' in the past

• Five countries are being released from the Excessive Deficit Procedure having mended their ways: Hungary, Italy, Latvia, Lithuania and Romania.

• An Excessive Deficit Procedure is being opened on Malta, which will take the total number of countries under a EDP to 16.

And here's the key quote from President Barroso:

Now is the time to step up the fundamental economic reforms that will deliver growth and jobs, which our citizens, especially our young people, anxiously expect.

This is the only way to address the two lasting legacies of this crisis – the serious loss of competitiveness in many of our Member States, and persistent unemployment, with all its social consequences.

The recommendations issued by the Commission today are part of our comprehensive strategy to move Europe beyond the crisis. They are concrete, realistic, and adapted to the situation of each of our Member States.

2.18pm BST

EC’s annual budget report: instant reaction

Here's the first reaction to the Commission's new country-specific recommendations:

2.15pm BST

Olli Rehn also singled out the French pension system, saying that the Paris government must clarify its reform plans so that the system is sustainable.

2.08pm BST

2.08pm BST

Rehn summed up the EC's new budget targets as an "important breathing space" for countries in which member states must use to implement structural reforms.

1.58pm BST

Lucky Belgium

Belgium appears to have avoided being fined for violating the Commission's budget rules:

1.57pm BST

Rehn reiterates Barroso's point that it is "essential" that France uses extra time to tackle the underlying problems with its economic competitiveness.

1.53pm BST

Rehn: Malta back on the excessive deficit list

Now Olli Rehn, the commissioner for monetary policy, is speaking in Brussels.

He explains that the Commission is recommending that Hungary, Italy, Latvia, Lithuania and Romania should all be removed from the 'excessive deficit' list. However, it wants to put Malta back on the list, just six months after removing it.

Rehn also defends the EU's growth and stability pact:

1.48pm BST

Barroso: Italy can’t stop

Jose Manuel Barroso
Photograph: EC

Finally, Jose Manuel Barroso warns that Italy cannot abandon its austerity programme, despite being removed from the list of countries with excessive deficits.

He explains that its national debt, at over 120% of GDP, remains a concern.

The high debt/GDP ratio is still a burden to the Italian economy…

That is why we cannot say Italy should relax its efforts.

Updated at 1.49pm BST

1.42pm BST

Barroso: Germany should let wages rise

Next question: Should Germany do more to help the rest of the eurozone?

Barroso replies that the EC would like to see Germany pay packets rise:

Germany should ally wages with productivity – that means increased wages.

He also warns that it is currently too difficult for small firms from outside Germany to access its economy, as our Europe editor Ian Traynor flags up from the press conference:

1.39pm BST

The live feed just froze for a moment, so I missed Barroso cracking a joke (of sorts):

1.37pm BST

Barroso: France must use extra time to fix economy

Question time, and Barroso denies that the EC has bowed to pressure from Paris when it gave France an extra two years grace to lower its deficit.

It was our decision, he insists, adding:

We believed, on a very sound basis, that this is what makes sense from an economic and financial point of view.

France must use this time to make its economy more competitive, he adds.

Updated at 2.05pm BST

1.33pm BST

Barroso: more ambition needed on growth

Jose Manuel Barroso says that the EC's main recommendation this year is that all member states must be more ambitious on making economic reforms to boost economic growth.

He cited the need to improve the single market for services, and to make changes to labour reforms.

He also said member state must monitor the "critical relationship" between wage rises and productivity, suggesting that unemployment would increase if wages rose too quickly.

He ended by calling for a new "European consensus" , saying this was vital for confidence, and thus growth.

1.26pm BST

The EC's new country-specific recommendations are online here.

1.25pm BST

Barroso adds that talk of a battle between growth and austerity has been futile. The key, he insists, is to make structural reforms to deliver long-term growth,

1.24pm BST

Barroso: we have time to slow pace of consolidation

Jose Manuel Barroso is outlining the EC's new recommendations now:

He say Europe now has time to slow down the pace of fiscal consolidation, which is why it has decided to allow France, Spain, Poland, Slovenia the two-year extensions just announced, and the 12-month extensions for the Netherlands and Portugal.

He is explaining that these member states need to use the extra time to make structural reforms.

But because those changes will take time to deliver results, Barroso adds, "specific focused action is needed for the unemployed, especially young people".

Updated at 1.45pm BST

1.19pm BST

Breaking: the EC has agreed to give six European countries more time to bring their deficits under the official target.

France, Spain, Poland and Slovenia are all being granted two-year extensions.

Netherlands and Portugal both get one-year extensions.

And as expected, the EC is also ending its 'excessive deficit procedure' against Italy, recognising the fact that its deficit is now below the 3% mark.

Updated at 1.23pm BST

1.12pm BST

EC announces country-specific recommentations

The European Commission is announcing the details of its assessment of the EU member states national budgets NOW.

A press conference is getting underway in Brussels – it will be streamed here.

1.04pm BST

US bond sale looms

Speaking of the markets, the US government will be selling bn of five-year debt this afternoon (1pm New York time, or 6pm BST).

That sale will be closely watched by bond investors, after the yield on 10-year Treasuries spiked 16 basis points to 2.17 per cent overnight

(that's via fastFT, the Financial Times's new rolling markets news and views service which launched this morning, and is well worth checking out).

Tuesday's rise in US bond yields has been blamed on concerns that the Federal Reserve will start 'tapering' its quantitative easing programme soon, especially after strong consumer confidence and house price data from America on Tuesday.

12.37pm BST

European markets in retreat

The FTSE 100 is flirting with a triple-digit loss as Europe's financial markets turn south again.

Here's the latest prices:

FTSE 100: down 98 points at 6664, -1.44%

German DAX: down 140 points at 8340, – 1.6%

French CAC: down 54 points at 3997, -1.3%

Spanish IBEX: down 61 points at 8449, -0.7%

Italian FTSE MIB: down 120 points at 17398, -0.7%

I just spoke with Brenda Kelly, senior market strategist at IG, who cited three reasons for falling markets;

1) the OECD's new, lower economic forecasts (and the news that the IMF lowered its growth forecast for China)

2) Concern over Japan, after a coalition party member warned that the country's bond yields must not rise much higher (details here)

3) profit-taking ahead of next week's US jobs data (the non-farm payroll), which will give "clarity and direction" to the markets.

She also explained that there's been volatility in the foreign exchange markets today, ahead of the European Central Bank's meeting next week. Will it impose negative interest rates on bank deposits, as the OECD advised today?

As Kelly put it:

There's a lack of real certainty over what's going on with central bank policy makers.

The Dow Jones index is expected to fall around 100 points, or 0.7%, when it opens in two hours time. The futures market is also indicating that Japan's Nikkei will fall up to 3% tomorrow morning….

And here's the biggest fallers on the FTSE this lunchtime:

Biggest fallers on the FTSE 100, May 29, lunchtime
Photograph: Thomson Reuters

11.50am BST

Gurria: Eurozone periphery will get better….

Back to the OECD's economic forecasts, and secretary general Angel Gurria has offered hope that the pain in the eurozone's periphery will end.

Speaking to reporters in Paris, Gurria argued that the economic measures being implemented in Europe's weaker countries will yield results.

He told reporters that:

In the periphery in particular, which was hardest hit by the crisis, that is where the reforms are taking place at the faster pace and where things eventually are, I believe, going to be looking better faster once we go through the acute stage of the crisis.

Gurria was speaking after the OECD had urged the ECB to take more unconventional methods to end the eurozone recession (see 10.56am).

OECD Secretary General Angel Gurria (left) talks as Norway Prime Minister Jens Stoltenberg (C) and OECD Chief Economist Pier Carlo Padoan listen during the presentation of the Economic Outlook during the OECD Week at the OECD headquarters in Paris on May 29, 2013.
OECD Secretary General Angel Gurria (left) presenting the Economic Outlook in Paris. Photograph: ERIC PIERMONT/AFP/Getty Images

11.27am BST

UK retail sales gloom

Retail sales in the UK have fallen at their fastest rate in over a year.

The CBI’s latest Distributive Trades Survey, released a few moments ago, showed that 33% of firms reported a fall in sales this month, while just 23% said sales were up.

That's the weakest year-on-year performance since January 2012, the CBI said.

Sales of most items, including clothing and footware, fell, while grocery spending was flat.

The survey also found that retailers are cutting back on their own spending, with investment intentions now the weakest since the start of last year.

Barry Williams, Asda's chief merchandising office for food, warned that consumers are being squeezed:

Retail sales growth has weakened since the start of the year as households continue to feel the pinch, with wages failing to keep pace with the cost of living.

Analysts warned that the data shows the UK economy remains weak.

Jeremy Cook, chief economist at the foreign exchange company, World First, said:

Unemployment has remained high, but the disparity between wages and prices is hurting those who still have a job as well.

Energy and food prices have stayed high throughout the spring and unless they fall, or wages start to recover, the High Street will remain a tough place to be this summer…

Updated at 11.40am BST

10.56am BST

OECD: ECB must consider QE and negatives rates

The big news from the OECD's new economic outlook (see 10.12am onwards) is that it has called on the European Central Bank to take more dramatic measures such as quantitative easing to drag the eurozone out of recession.

The OECD wants the ECB to give serious consideration to launching an electronic money-print operation, in the face of a steadily shrinking economy.

It also recommended cutting the interest rate paid to bank deposits into negative territory, meaning banks would effectively be charged to leave money sitting with the ECB rather than in the real economy.

OECD chief economist Pier Carlo Padoan warned (via Reuters):

Europe is in a dire situation.

We think that the euro zone could consider more aggressive options. We could call it a euro zone-style QE.

The call came as the OECD slashed its forecast for the eurozone to a contraction of 0.6% this year, down from 0.1%. It warned that activity was falling in the face of fiscal consolidation, falling consumer confidence and tight credit conditiions,

It urged government's to allow "automatic stabilisers to operate" — ie, accept that tax receipts will fall during a recession while welfare payments will rise.

"High unemployment and excess capacity will depress inflationary pressures," it added, alongside this graph showing the grim state of the eurozone economy:

Eurozone GDP forecast, May 2013
Photograph: OECD

And here's the key section from the report (page 78 onwards):

The ECB should supplement its recent cut in the refinancing rate by reducing the deposit rate to below zero and issue forward guidance based on inflation prospects.

Further non-standard measures might be needed to improve monetary policy transmission. In particular, additional asset purchases could be considered.

Stronger bank balance sheets would enhance credit expansion and a banking union is critical to reduce negative feedback loops between sovereigns and banks.

Structural reforms in labour and product markets, including completing the Single Market, would boost growth and jobs.

Updated at 11.09am BST

10.25am BST

OECD cuts growth forecasts across the board

Here's a round-up of the OECD's new economic forecasts for 2013:

• It has slashed its growth forecast for the global economy, to 3.1% this year, from 3.4% six months ago.

• It trimmed its US growth forecast to 1.9%, from 2%.

• It cut its China forecast from 8.5% to 7.8% (so slightly higher than the iMF's own prediction this morning – see 7.52am)

• The OECD now expects the eurozone to shrink by 0.6%, not the 0.1% contraction expected

German GDP is tipped to rise by 0.4%, down from 0.6% six months ago

• While France's economy is expected to shrink by 0.3%, not grow by 0.3% as expected last November

10.12am BST

OECD economic outlook released

The Organisation for Economic Cooperation and Development (OECD) has just published its economic outlook, and slashed its growth forecast for the UK this year

The OECB warned that Britain will grow slower than expected, due to the government's spending cuts and struggling consumer and business confidence.

From Paris, our economics correspondent Phillip Inman reports:

In its half-yearly forecasts, the Paris-based Organisation for Economic Co-operation and Development warned that a long and bumpy recovery in the eurozone will continue to hit exports while the government's deficit reduction programme and the paying down of consumer debt will act as a brake on growth.

The OECD said it expected UK national output to grow by 0.8% this year, in line with most economic forecasts, but down from 0.9% six months ago.

It also cuts its growth forecast for 2014 to 1.5%, down from 1.6% six months ago.

Here's Phillip's full story: UK economic growth forecasts cut for 2014 by OECD

Updated at 10.36am BST

9.53am BST

BMW to recruit unemployed Spanish young people

BMW is recruiting a small number of unemployed young Spaniards to work in Germany in a pilot programme to "give something back" to its customer countries.

Here's the full story: BMW to recruit unemployed Spanish young people to 'give something back'

And here's more details:

Twenty-five workers aged 18 to 25 will be trained for a year at the German carmaker's headquarters in Munich, the BMW personnel chief, Milagros Caina-Andree, told Frankfurter Allgemeine Zeitung on Wednesday.

"They should be immersed in German culture, possibly live with a BMW host family and work in development, sales, marketing or another area. After that, these young people can go back home or stay here," she said

Yesterday, French president Francois Hollande argued that one solution to Europe's youth jobless crisis was to make it easier for appentices, as well as students, to study overseas. BMW's small pilot scheme could be the start of something bigger….

9.44am BST

Eurozone loans contract again

Loans to Eurozone companies fell again in April for the 12th month in a row, as the region's private sector found it hard to invest and some banks struggled to lend.

The European Central Bank reported that loans to the private firms fell by 0.9% year-on-year last month, a drop of €18bn. But M3 money supply – which measures the amount of cash in the economy – was up by 3.2%.

Howard Archer, economist at IHS Global insight, said the data was disappointing, and "clearly reflected an ongoing combination of limited supply and muted demand."

And here's some early reaction of Twitter, from the BBC's Gavin Hewitt and Societe Generale's currency expert, Kit Juckes.

9.34am BST

And here's a graph showing how German unemployment has outperformed the eurozone average since the crisis struck (following today's data

German unemployment vs eurozone average
Via Chris Williamson of Markit.

Updated at 9.35am BST

9.28am BST

Here's a full story about the IMF cutting its growth forecasts for China: IMF lowers China growth forecast and urges reforms.

Updated at 9.28am BST

9.25am BST

Here's Carsten Brzeski of ING's take on this morning's German jobless data (see 9.12am)

Despite the stable unemployment rate, it remains noteworthy that the non-seasonally adjusted drop was the weakest May performance since 2005. To some, this is a clear warning that the debt crisis is finally taking its toll on the German labour market. In our view, however, the weak spring revival of the labour market can also be explained by the relatively high number of public holidays in May and the still cold weather. Therefore, it is far too premature to start singing Swan Songs on the labour market.

Brzeski argues that the German labour market remains "the showcase example" for successful labour market reforms – topical, with the EC's latest budget recommendations due later today.

 Even the current success has also received a helping hand from strong export growth and the first wave of ageing, the reforms of the mid-2000s are still paying off. Up to the early 2000s, the German economy required growth of at least 1.5% to create new jobs. In recent years, GDP growth rates of less than 1% were sufficient for job creation. This bodes well for the near-term outlook, indicating that despite an expected GDP growth rate of only roughly 0.5% this year, the labour market should remain stable. At the Eurozone level, it is obvious that the success of its own structural reforms will further encourage the German government to continue hammering on structural reforms.

Updated at 9.25am BST

9.12am BST

German jobless data

The German government has declared that its labour market remains in good shape, after its latest unemployment data was released.

The number of people out of work fell below the 3 million mark for the first time since December, dropping by more than 83,000. This pulled the jobless rate down to 6.8%, from 7.1% last month.

However, on a seasonally-adjusted basis the number of people out of work rose by 21,000, much more than the 4,000 increase expected. That left the seasonally-adjusted jobless rate at 6.9%, unchanged from April.

Labour office chairman Frank-Juergen Weise commented:

Overall the German labour market is still in a good condition and is putting in a solid performance in a tough economic environment.

8.57am BST

Upbeat economic news from Sweden. It just beat analyst forecasts with growth of 0.6% in the first three months of 2013. That's twice as fast as economists had expected – in a quarter when the eurozone fell deeper into recession.

8.49am BST

The agenda

The other main event in the diary today comes from the OECD, which will publish its latest economic outlook in Paris this morning. That, and the EC's latest budget review (8.20am), means Europe's struggling economy could be under particular scrutiny.

OECD economic outlook released. 10am BST

EC announces annual budget review and makes policy recommendations: from 1pm BST

UK retail sales: 11am BST

Portuguese parliament debates latest budget: afternoon

Updated at 9.47am BST

8.29am BST

The Bank of Thailand has just become the latest central bank to ease monetary policy, by cutting interest rates by a quarter-point to 2.5%.

8.26am BST

Italy planning to be prudent

Around €8bn of public money will be 'unlocked' if Italy is freed from the EC's excessive deficit procedure today (as appears likely).

That money had been earmarked for deficit reduction, but could now be spent by Enrico Letta's government. The Italian PM, though, has already tried to dampen hopes of a spending splurge, saying resources will not be freed immediately (more details here).

8.20am BST

EC to ease austerity focus

The European Commission is expected to formally shift its focus away from austerity and in favour of growth later today, when it publishes its annual review of the national budgets of all 27 EU members.

The EC is expected to give three of its largest countries, France, Spain and the Netherlands, more time to bring their deficits down to the 3% target.

They'll be encouraged to reshape their economies, open up their labour markets, and implement structural reforms, but the underlying message will be that the pace of fiscal consolidation can be slowed.

As one official put it to Reuters:

The main message will be that the emphasis is shifting to structural reforms from austerity.

That is likely to mean two-year extensions for both Spain and France, giving them until 2015 to cut their annual borrowings below 3% of national output. The Netherlands is expected to get 12-months grace.

The EC will probably argue that the move is justified because the threat of a eurozone break-up has faded away. But opponents of full-blooded austerity could also take heart that the pendulum has swung, finally, in their favour.

The EC won't abandon its push for reform, either. Instead, it is likely to criticise a number of governments for failing to implement reforms quickly enough. Francois Hollande's government could be singled out.

As the FT puts it:

Brussels is expected to criticise several governments for their slow pace of reform and will demand immediate action by several it believes are at risk of prolonged economic stagnation. These include France, where senior officials in Brussels and Berlin believe time is running out for sufficient labour and economic reforms.

Italy, though, is likely to be freed from the EC's excessive deficit procedure, having cut its annual borrowing below 3% of GDP.

Updated at 8.21am BST

7.52am BST

IMF cuts Chinese growth forecast

Women shop for discounted fashion at a retail center, in Beijing, China, 29 May 2013. As China's leaders attempt to rebalance the economy, raising individual consumption is seen as one of the main goals.
A retail center, in Beijing today, where China’s leaders have been advised to boost individual consumption. Photograph: ADRIAN BRADSHAW/EPA

Good morning, and welcome to our rolling coverage of events across the eurozone and the wider global economy.

Overnight, the International Monetary Fund has lowered its growth forecast for China, in the latest signal that the world's second-largest economy is slowing.

The IMF urged the Beijing government to take "decisive" action to stimulate domestic consumption and to control the recent expansion of credit, as it trimmed its growth forecast for 2013 and 2014 to 7.75%, from 8% this year and 8.2% next year.

David Lipton, the first managing director of the IMF, warned that China's ability to absorb troubles in the global economy was shrinking.

Lipton said;

While China still has significant policy space and financial capacity to maintain stability even in the face of adverse shocks, the margins of safety are narrowing and a decisive impetus to reforms is needed to contain vulnerabilities and move the economy to a more sustainable growth path.

The IMF fears that the growth of credit in China is creating a stock of bad debts that will hamper future growth. As Lipton put it:

China’s economy faces important challenges. In particular, the rapid growth in total social financing raises concern about the quality of investment and its impact on repayment capacity.

Bloomberg has more details from Beijing: China Growth Outlook Cut by IMF as ‘Decisive’ Reforms Urged.

China needs a “decisive push for rebalancing toward higher household incomes and consumption,” Lipton said. The nation should allow more competition in industries “currently considered strategic” and increase dividends from state-owned enterprises to “improve financial discipline and provide additional fiscal revenue,” Lipton said.

The IMF's annual report comes a week after China's factory output took a surprise drop. Today's growth forecasts brings the IMF roughly into line with City analysts, but will add to concerns that the Chinese economy is losing its zip.

I'll pull together more reaction to the report this morning.

Also coming up today… the EC is to announce its annual review of compliance with its budget rules. It is expected to give several countries more time to hit their deficit targets. More to follow….

Updated at 8.11am BST

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Published via the Guardian News Feed plugin for WordPress.

In the trading room today: What is Keeping the GBP Capped? With the GBP looking heavy and unable to build a strong momentum, we take a close look at the sterling and explain the reasons why the GBP is being capped against the EUR and the USD for the time being, we analyze the test of an important support level in the GBP/USD currency pair, we continue to monitor the range in the EUR/USD pair, we note the pullback of the USD vs JPY, we highlight the market’s reaction to the Japanese Retail Sales, the German Unemployment Rate, the U.K. CBI Distributive Trades, and the U.S. Consumer Confidence, we discuss new forecasts from Bank of New York-Mellon and Commerzbank, and prepare for the trading session ahead.

Francois Hollande: post-crisis generation need help now. Schäuble and Moscovici pledge help, but no firm new plan yet. Stock markets rally. US consumer confidence index at five year high…after French consumer confidence takes a tumble…


Powered by Guardian.co.ukThis article titled “Hollande’s youth jobless warning, as strong US data fuels market rally – as it happened” was written by Graeme Wearden, for theguardian.com on Tuesday 28th May 2013 14.10 UTC

6.34pm BST

Closing summary

Time to wrap things up for the day. Here's a closing summary:

European politicians from across the region have pledged to take new steps to address the region's youth unemployment crisis, although details remain sketchy tonight.

In a speech in Paris, French president Francois Hollande warned that the post-crisis generation would "turn their backs" on the European project forever, unless leaders could reverse the rising tide of joblessness among young people .

Citizens are turning their backs on Europe and the construction of the European project.

It's the idea of Europe that is being challenged.

(see 11.35am for highlights, or watch the speech in the video above)

Hollande said the EU must agree the so-called Youth Guarantee, a proposal under which young people would be guaranteed a job or training within four months of leaving school (details at 12.03pm).

He also advocated expanding the Erasmus programme so apprentices, as well as university students, could be trained and educated in anothe country.

Several other finance ministers also pledged to do more to fight youth unemployment. Germany's Wolfgang Schauble agreed that the unity of Europe was at stake, while France's Pierre Moscovici said structural reforms could help get under 25s into jobs.

(see 10.10am onwards for details, and 12.39pm for a summary from Bloomberg).

But firm measures will probably have to wait until EU leaders meet in late June, and Angela Merkel holds a conference on the issue in Berlin on 3 July.

In other news…. the financial markets rallied sharply following strong US economic data, and the latest indications that central bankers won't halt their monetary easing measures soon.

In London, the FTSE 100 finished 107 points higher — see 5.26pm for closing prices and analyst reaction.

That followed a jump in US consumer confidence to a five-year high (see 3.06pm)….

…and the news that US house prices have risen at their fastest annual rate in almost seven years (see 2.29pm)

France's central bank governor warned that the country must cut spending. Christian Noyer also warned that the upcoming Financial Transaction Tax could harm the French banking sector (see 2.23pm)….

….while French consumer confidence tumbled unexpectedly, to its joint-lowest level in decades. (see 10.44am for details).

And the International Monetary Fund declared that it still has support in Christine Lagarde, its managing director, after her appearance at a special court last week. See 4.52pm for details.

• Italy sold two-year bonds at the lowest interest rates since the eurozone began. (see 12.47pm)

Polling data from Greece showed that New Democracy had widened its lead over the Syriza opposition (see 1.05pm)

While in the UK, a poll found that UKIP is on track to win the most votes in next year's European elections (see 1.28pm)

I'll be back tomorrow. Until then, thanks, and goodnight. GW

Updated at 6.39pm BST

6.03pm BST

Rajoy: we need action now on youth unemployment

Spanish prime minister Mariano Rajoy has called for more help on youth joblessness now.

Speaking at the Europe: Next Steps conference in Paris, Rajoy added that more effort is needed to help small firms access credit.

Reuters has the details of Rajoy's speech:

Spain's Rajoy said on Tuesday that both the European Investment Bank and European Central Bank should do more to help credit flow to small businesses.

Speaking at a conference on youth employment in Paris, Rajoy also said the European Union "should establish a mechanism to temporarily exclude from the national deficit, for the purposes of the excessive deficit procedure, the cost of exemptions granted from social security contributions when young people are hired."

Rajoy also welcomed the news that Angela Merkel will hold a conference on youth joblessness in Berlin on July 3:

Updated at 6.04pm BST

5.54pm BST

FT: Hollande speech shows concern is growing


French President Francois Hollande delivers his speech today. Photograph: CHARLES PLATIAU/AFP/Getty Images

The FT says Francois Hollande's speech on youth joblessness this morning (see 11.35am for highlights and video) was a sign of "growing political concern" about Europe's youth unemployment levels.

Here's a flavour:

We must act urgently – 6m youngsters are out of work in Europe … close to 14m are without work, study or an apprenticeship,” Mr Hollande said at a conference in Paris that brought together a number of EU finance and labour ministers.

He was speaking as France and Germany stepped up efforts to show they were working to tackle the problem, seen as a key element in flagging support for EU institutions and the continent’s political leadership.

Mr Hollande separately met French and German finance and labour ministers to discuss a joint initiative he said would culminate in a meeting of all EU labour ministers in Berlin in early July.

But the FT added that (as I tried to explain at 12.03pm) most of the measures outlined by Mr Hollande and the various ministers have already been "widely canvassed" by EU leaders and the commission.

More here: François Hollande raises alarm over Europe’s young jobless

Updated at 5.55pm BST

5.26pm BST

European stock markets rally – what the analysts say

Traders Dan Ryan, left, and Gordon Charlop work on the floor of the New York Stock Exchange Tuesday, May 28, 2013
Traders Dan Ryan, left, and Gordon Charlop work on the floor of the New York Stock Exchange today. Photograph: Richard Drew/AP

Europe's stock markets have closed with strong gains across the board. In London the FTSE 100 jumped more than 100 points as it recovered some of last week's losses.

Here's the closing prices

• FTSE 100: up 107 points at 6762, + 1.62%

• German DAX: up 97 points at 8480, +1.16%

• French CAC: up 55 points at 4050, +1.39%

• Spanish IBEX: up 147 points at 8511, +1.77%

• Italian FTSE MIB: up 360 points at 17519, +2.1%.

And on Wall Street, the Dow Jones and the S&P 500 are both up around 1%.

City traders are attributing the rally to two factors.

1) the strong US data this afternoon (house prices rising at their fastest level since 2006 and a five-year high for consumer confidence)

2) the latest signals from central bankers that the stimulus package isn't over (see 8.50am for details of supportive comments from the Bank of Japan and the European Central Bank).

This morning's bleak French consumer confidence data (see 10.44am), hasn't dented the rally — on the grounds that bad news means central banks won't tighten monetery policy….

Here's a selection of analyst comment this evening:

Chris Beauchamp, market analyst at IG

What a difference a weekend makes. Last week markets seemed to have assumed the world, or at least QE, was coming to an end. After a few days away, however, investors have come back with a far more positive outlook. In part they are being helped on their way by supportive comments from the Bank of Japan, which is still tightly-wedded to its easing à la outrance policy.

However, perhaps the most important factor is the growing distance from last week’s Fed minutes. Time has dulled the impact, and investors feel that they can be more relaxed about the hawkish views of a few policymakers. If last week was the dip, then it was shorter than that expected by the even the most positive of traders.

May is almost out, and the ‘go away and sell’ thesis still hasn’t kicked in.

Michael Hewson of CMC Markets

Despite there being very little evidence of a turnaround in economic fundamentals in Europe we’ve seen a complete about turn in sentiment after the sharp losses seen at the end of last week as investors pile back into equity markets on little more than continued central bank support from the Bank of Japan, and expectations of future support from the ECB after comments from ECB member Peter Praet that there was still scope to reduce rates further.

…Poor consumer confidence data from France and a sharp slide in German import prices has fuelled expectations of further easing from the ECB at next week’s rate meeting. While these expectations of further ECB generosity has helped confidence in risk assets there is no getting away from the fact that Europe’s two largest economies continue to diverge away from each other.

Consumer confidence in France sits at its lowest levels since 2008, in complete contrast to Germany where it’s at its highest levels since September 2007, with no expectation that EU leaders have any idea of what to do about it.

Viktor Nossek, head of research at Boost ETP

The FTSE 100 emerged from the Bank Holiday weekend with a bang. Thursday's sharp drop was a distant memory as the UK's flagship index brushed aside any remaining concerns.

Exceptionally strong house price and consumer confidence data from the States will only feed the feel-good factor surrounding the FTSE. On Tuesday it felt like we made another major step towards the symbolic 7000 mark.

Despite years of weak domestic demand, UK equities are looking increasingly attractive. Britain's blue chips have adjusted to the weaker demand in the economy, repaired their balance sheets and restored their dividend-paying capability.

All this despite Britain's meagre rate of GDP growth. But these days, a strong economy is no longer a prerequisite for strong profits.

4.52pm BST

IMF board backs Christine Lagarde

Just in, the executive board of the International Monetary Fund has declared that it has confidence in managing director Christine Lagarde, after a special French court decided not to place her under investigation.

Here's the full statement:

As we have said before, it would not be appropriate to comment on a case that has been and is currently before the French judiciary.

However, the Executive Board has been briefed on this matter, including on the outcome of the recent hearings before the Court of Justice of the Republic in Paris, and has reaffirmed its confidence in the Managing Director’s ability to effectively carry out her duties.

Last week, Lagarde was questioned for two days over her role in a controversial €400m payment given to French businessman Bernard Tapie while she was France's finance minister.

Following the hearing, the court decided not to place Lagarde under formal investigation. Instead the IMF chief – who has denied any impropriety – will be an "assisted witness" in the case. That means she will testify in the inquiry, but is not under suspicion of any offence.

More details here.

France's Christine Lagarde speaks to the press as she leaves the French Republic Justice Court on May 24, 2013 in Paris.
France’s Christine Lagarde speaking to the press as she leaves the French Republic Justice Court last Friday night. Photograph: JACQUES DEMARTHON/AFP/Getty Images

4.31pm BST

Marketwatch Graphics has pulled together this graph showing how US house prices are now growing at their fastest pace since before the credit crunch.

As flagged up at 2.29pm, new data released today showed prices are 10.9% higher across 20 US cities.

4.11pm BST

US Treasury bonds are dropping in value, the mirror image of shares on Wall Street.

That has pushed up the yield (interest rate) on 10-year US debt by 10 basis points to around 2.11% (ie, from 2.01% overnight).

Updated at 4.11pm BST

4.02pm BST

Moody’s hikes outlook on US banks

The good news keeps coming, for America at least. Moody's just raised its rating on the US banking system to stable, from negative, for the first time since the financial crisis struck in 2008.

3.10pm BST

That strong US consumer confidence data has sent shares on Wall Street even higher, with the Dow Jones industrial average now up 201 points at 15504.

The US dollar is also gaining against other currencies, flags up the FT's Alice Ross:

Updated at 3.30pm BST

3.06pm BST

US consumer confidence at five-year high

More strong economic data from the US — the monthly consumer confidence index has jumped to a five year high.

The US consumer confidence index came in at 76.2, up from 69 last month. Economists had expected much smaller rise, to 71.

And the expectations index, showing how upbeat people were about the future, also posted a strong rise – to 82.4 from 74.3.

Lynn Franco, director of economic Indicators at The Conference Board (which compiled the data) said Americans are "considerably more upbeat" about future economic and job prospects.

Back-to-back monthly gains suggest that consumer confidence is on the mend and may be regaining the traction it lost due to the fiscal cliff, payroll-tax hike, and sequester.

Updated at 3.35pm BST

2.41pm BST

Stock market rally continues as Wall Street opens

Stock markets are rallying strongly today, with the FTSE 100 now up by 120 points, or 1.8%, at 6775 as Wall Street opens.

The prospect of ongoing central bank help, and the better-than-expected US house price data (see 2.29pm), appear to be a heady cocktail for the markets.

In New York the Dow Jones index is up 150 points, or around 1%, while the Italian stock is up over 2%.

Here's the latest prices:

Stock market prices, May 28 2013
Photograph: Thomson Reuters

Reaction to follow….

2.29pm BST

US house prices index beats forecasts

US house prices are rising at their fastest pace in nearly seven years, according to the latest piece of upbeat American economic data.

The S&P/Case Shiller index of house prices in 20 cities showed prices rose by 10.9% in March, compared with a year ago, beating analyst forecasts.

Prices were 1.1% higher month-on-month.

2.23pm BST

French central bank governor warns on spending and FTT

While Francois Hollande was speaking in Paris this morning, France's central bank governor was calling for new spending cuts.

Christian Noyer used his annual report to the French government to warn that France must take difficult decisions on public expenditure and its welfare system.

Noyer warned that:

Over a certain threshold, which our country has probably crossed, any increase in public spending and debt has extremely negative effects on confidence.

…adding that "a profound change in public policy" is needed if the France economy is to deliver strong and lasting growth that creates jobs.

And on welfare spending, Noyer's message was clear — it must be cut.

Welfare spending accounts for around 30% of GDP and the country’s social deficit path is unsustainable as it stands.

Giving in to the temptation to keep raising social contributions leads to an increase in labour costs, which ultimately weighs on activity and jobs: the best way to deal with the problem is by tackling spending as this would erode the cost competitiveness, which is already insufficient.

You can read the whole letter here (pdf).

Towards the end, Noyer also warned that Europe's plans for a Financial Transaction Tax must be carefully defined. Otherwise, France faced "the risk of destroying entire segments of our financial industry…" he wrote.

As the Telegraph's Phil Aldrick points out, Sir Mervyn King claimed last week that there was no support for the FTT among European central bankers he'd spoken to.

Here's more coverage of the Noyer letter:

Telegraph: France's central bank head warns FTT could 'destroy' jobs

Reuters: ECB's Noyer says France must target spending

Wall Street Journal: Noyer Urges Hollande to Cut Spending, Mull Welfare Cuts

2.07pm BST

European Council president Herman Van Rompuy has added his voice to the chorus insisting that action will be taken on youth unemployment.

Speaking at the European Parliament this lunchtime, Van Rompuy pledged to "put the fight against unemployment high on our agenda" at the next EU summit in June (prompting the obvious reposte – why wasn't it there already?)

Van Rompuy said the European Council meeting is an opportunity for leaders to support the Youth Guarantee, under which all young people would be guaranteed training, further education or employment within four months of leaving school (part of the plan outlined by Francois Hollande this morning).

This should be operational by January 2014, he said.

Van Rompuy also echoed Hollande's point that Europe's young people are looking for serious progress on the issue:

We must rise to the expectations of the millions of young people who expect political action.

More here (pdf).

1.28pm BST

Open Europe/Comres poll
Open Europe/Comres poll

Speaking of opinion polls, a new survey by Open Europe/ComRes has found that Britain's UKIP party are on track to win the most votes in next year’s European elections.

The pol showed that UKIP would come first overall with 27%, closely followed by Labour on 23%. The Conservatives would come third with 21%.

The survey also found more UK citizens would vote to leave the EU (41%) than stay (37%) if an in-out referendum was held today

However, the picture changes if David Cameron achieves 'a significant return of powers' from Brussels to Westminster. Then, 47% of voters believe they'd vote to stay in the European Union,while 32% would still vote to leave.

More details here (pdf).

1.05pm BST

Greek polling data: New Democracy extends lead

Support for Greece's governing New Democracy party has risen in recent weeks, according to an opinion poll published this morning.

The survey, for Mega TV by GPO, showed that New Democracy is backed by 21.3% of voters, a 1.8% lead over the left-wing Syriza party.

Two other polls released over the weekend also put ND ahead of Syriza, with a lead of up to 2.8%. That, according to Greece's Kathimerini, is the widest lead since ND took power in a three-party coalition almost a year ago.

GPO's poll also found that the neo-Nazi Golden Dawn party remains in third place. Here's the full details:

• New Democracy: 21.3%

• Syriza: 19.5%

• Golden Dawn: 10.4%

• Pasok: 6.7%

• Independent Greeks: 6.4%

• KKE: 5.8%

• Democratic Left: 5.1%

• Antarsya: 1.8%

• New Greece: 1%

Updated at 3.43pm BST

12.47pm BST

Italy sold two-year bonds at the lowest interest rate since the euro was created this morning.

It marks a remarkable change of fortune since its future in the eurozone was in doubt 18 months ago. Today's auction was helped by speculation that the European Commission will propose ending its excessive deficit procedure against Italy tomorrow (details here)

Reuters has more details of the auction:

Rome sold €2.5 of zero-coupon bonds maturing Dec. 2014 at 1.11%, down from 1.17% at a similar sale one month ago.Italy also issued €987m of inflation-linked BTPei bonds maturing Sept. 2018, paying a yield of 1.83%.

Investors are cautiously returning to high-yielding debt after they cashed in on Italian and Spanish bonds last week on expectations the U.S. Federal Reserve may scale back its asset buying programme in the next few meetings.

12.39pm BST

Bloomberg’s take

Bloomberg sums up this morning's events thus:

Germany and France said companies in struggling euro-area countries need cheaper credit to create jobs and ease youth unemployment, as Europe’s two biggest economies seek a joint response to the debt crisis.

German Finance Minister Wolfgang Schaeuble, his French counterpart, Pierre Moscovici, and Werner Hoyer, who heads the Luxembourg-based European Investment Bank, all singled out higher company financing costs in southern Europe as an obstacle to economic recovery at a meeting in Paris today.

“An Italian or Spanish small or medium-size enterprise doesn’t fund its investments at the same rate as a German company,” Moscovici said. “The channels of financing aren’t working.” Schaeuble said soaring youth unemployment in the region undermines European unification.

More here: Franco-German Youth Jobs Push Seen Hinging on Company Credit

12.34pm BST

Italy joins Germany and France in backing more action

Italian Labour minister Enrico Giovannini has agreed that Europe must stop abandoning its young people.

Like Germany's Wolfgang Schäuble and France's Pierre Moscovici (see 10.10am onwards), Giovannini told the Europe: Next Steps conference that radical new action was now needed.

Giovannini said:

We have to rescue an entire generation of young people who are scared. We have the best-educated generation and we are putting them on hold. This is not acceptable.

Words alone, though, aren't much good to the 5.7 million young people out of work in the EU.

Francois's Hollande's speech (see 11.35am) remains the clearest 'vision' of a New Deal, but it does appear that the actual agreement may have to wait until late June. Or possibly even 3rd July, when Angela Merkel hosts a conference on the issue in Berlin.

As Reuters puts it:

While all agreed on the urgency needed to tackle youth unemployment, ministers offered no concrete plans, insisting Europe must be pragmatic and work on various strands.

Updated at 12.35pm BST

12.21pm BST

Former Italian PM Mario Monti just gave a speech at the Europe: Next Steps conference in Paris. He welcomed signs that EU leaders are giving greater attention to structural reforms, rather than just insisting on fiscal discipline.

The Berggruen Institute tweeted some of Monti's other key lines:

12.10pm BST

Charts: The youth unemployment crisis

This chart from the EC shows how youth jobless rates vary across Europe, with Greece and Spain both suffering rates over 50%.

Youth joblessness across the EU
Photograph: European Commission

And this chart grabbed from Bloomberg TV shows the highs and lows (Portugal's 38% is slightly obscured)

Youth unemployment across Europe
Photograph: Bloomberg TV

12.03pm BST

Youth guarantee explained

The European Commission released a memo this morning, outlining its own efforts on youth unemployment. Perhaps stung by events in Paris?

The memo (click here) includes full details of the Youth Guarantee which Francois Hollande says must be brought in swiftly (see 11.35am).

The EC explains:

The Youth Guarantee, based on experience in Austria and Finland, seeks to ensure that all young people up to age 25 receive a quality offer of a job, continued education, an apprenticeship or a traineeship within four months of leaving formal education or becoming unemployed.

It is based on succesful programs in Austria and Finland.

The full cost of the scheme, though, has been estimated at €21bn. That's more than three times the €6bn currently set aside, but a fraction of the economic cost of youth unemployment.

The EC reckons that unemployment benefit, lost productivity and lost tax revenue from youth joblessness comes to €153bn per year.

In addition, for young people themselves, being unemployed at a young age can have a long-lasting negative ‘scarring effect’. These young people face not only higher risks of future unemployment, but also higher risks of exclusion, of poverty and of health problems.

The memo also outlines how the Erasmus scheme is already being expanded, with a 40% increase in its budget, to allow more young people to study abroad.

11.35am BST

Video: Francois Hollande outlines New Deal

The "Europe – Next Steps" conference in Paris began with a keynote speech from Francois Hollande, in which the French president outlined his vision of a new strategy for youth unemployment.

Hollande warned that the millions of young people across Europe out of work and education are looking to their leaders for a response based on solidarity.

Hollande dubbed them the "post-crisis generation", who will "for ever after, be holding today's governments responsible for their plight".

Here's the key section (from 8 minutes, in the video embedded above)

Remember the postwar generation, my generation. Europe showed us and gave us the support we needed, the hope we cherished. The hopes that we we could get a job after finishing school, and succeed in life.

Can we be responsible for depriving today's young generation of this kind of hope?

Imagine all of the hatred, the anger, it's not anger that we're talking about in fact, it goes more than that. We're talking about a complete breakdown of identifying with Europe.

What's really at stake here is, not just 'lets punish those in power'. No. Citizens are turning their backs on Europe and the construction of the European project.

It's the idea of Europe that is being challenged.

Hollande then outlined three key areas for the New Deal which he hopes to see agreed by European leaders at the next EU summit in late June

1) EU leaders would commit to spending the €6bn assigned to fight youth unemployment "very quickly", rather than letting the money sit around.

Those areas with 25% youth unemployment or higher should get 'accelerated spending', he added.

2) EU leaders should implement a "security system" for young people who leave school without a job. After 4 months they would be able to find a job, or additional training, or an internship, or an apprenticeship.

It's a great idea, this is what we call the Youth Guarantee. But do we have the ability to implement this objective? Well, we have no choice, we have to do it now.

3) Hollande proposed opening up the Erasmus scheme, under which university students could study overseas. He wants all young people to get the opportunity:

All young people, regardless of their educational background, would be able to go and continue learning new skills in another European country.

Hollande also said small firms need to be given more help to get credit, particularly in crisis-hit countries, and urged the European Investment Bank must release funds to SMEs swiftly.

He concluded by warning that Europe faces "an emergency when it comes to youth unemployment". Hollande explained that he and Angela Merkel were in agreement over the issue, and would keep developing their "bilateral project to create more jobs for young people in Europe.

And he finished by expressing hope that EU leaders will agree wide-ranging new measures at their summit in June, which is followed by a meeting of European labour ministers in early July.

Updated at 11.48am BST

10.44am BST

Graph: French consumer confidence

This graph from Reuters underlines the seriousness of today's drop in French consumer confidence.

As well as a near-five year low, this month's reading of 78 is the joint lowest reading at least three decades:

French consumer confidence vs GDP
Photograph: Thomson Reuters

10.33am BST

Cue much milling around in Paris:

10.32am BST

Wolfgang Schäuble rounded up the first panel session in Paris (see 9.24am onwards) with a call to European youth not to lose faith.

Europe is our future. We do not have a better future than Europe.

Schäuble also denied that Europe should just copy America's approach to employment and investment:

10.23am BST

The head of the European Investment Bank, Werner Hoyer, agreed with Wolfgang Schäuble and Pierre Moscovici that youth unemployment is a threat to the European project.

Speaking on the same panel, Hoyer said the EIB had billions of euros of extra funding for projects that would benefit Europe, particularly the youth situation.

Updated at 10.27am BST

10.10am BST

Schäuble and Moscovici on youth unemployment

Wolfgang Schauble
Wolfgang Schäuble.

Germany's Wolfgang Schäuble has warned that the youth unemployment crisis threatens European stability.

Speaking at the EU: Next Steps conference in Paris, the Germany finance minster warned that EU leaders would "lose the battle for European unity" if they do not win the battle over youth unemployment.

Schäuble said the crisis in the eurozone had been stabilised, but not solved, cautioning:

We cannot keep a generation on hold

Schäuble said small firms had a crucial role to play in getting more young people into work, if they could show more innovation.

But he also warned against setting the “wrong incentives” with new aid policies, says structural reforms are needed to make Europe more competitive, adding:

Europe has twice as high social welfare costs as its competitors.

He was followed by France's Pierre Moscovici, who agreed that Europe's future was at risk:

Pierre Moscovici
Pierre Moscovici Photograph: /EU Next Steps conference

Moscovici told the conference that toung people are asking whether they should stay in Europe or not. He added:

We want Europe to be a continent where youth feels comfortable.

Moscovici agreed that Europe does need "structural reforms", adding:

We are not afraid of structural reforms in France.

So, a firm commitment to new measures on youth unemployment, but no actual details of this New Deal. Yet, anyway…

Michel Sapin, France's Labor minister, told the conference that the big decisions will be taken at an EU summit in a month's time:

Updated at 10.23am BST

9.42am BST

Live audio feed from Paris

Here's a live audio feed from the Europe: Next Steps conference, complete with an English translation:

Updated at 10.48am BST

9.34am BST

Karine Berger MP
Karine Berger MP this morning.

French socialist MP Karine Berger says European leaders needs to fix the youth unemployment crisis fast.

Speaking on Bloomberg TV a few moments ago, Berger warned that:

Otherwise, thousands of young people in Europe will be hurt forever.

Berger agreed that the structure of the labour markets need to be changed, to help young people into employment:

We need to find growth, and we need to find structural solutions.

Easier said than done, of course. Reforming labour markets is notoriously tricky politically, as it typically means making it easier to dismiss workers or to force them to take new jobs.

9.24am BST

Watch the Paris Conference here

The 'New Deal' on youth joblessness will be discussed at a conference in Paris today called Europe: Next Steps, at the Institut d'Etudes Politiques de Paris.

It's being streamed live here: Europe: les prochaines étapes

Updated at 10.47am BST

9.08am BST

French consumer confidence slides

We've had grim economic data from France this morning, where consumers are more pessimistic than any time in nearly five years.

The French monthly consumer confidence reading fell to 79, the lowest reading since July 2008, from 83 last month (where the long term average is 100).

9.05am BST

Mike van Dulken of Accendo Markets suggests that today's markets rally shows the City is more relaxed about the US Federal Reserve's plans, after last week's flap over when it will start to slow its own quantitative easing operation:

Updated at 9.12am BST

8.50am BST

Markets rally again

In London, the FTSE 100 has jumped by 100 points, or 1.5%, this morning as investors return their desks after the bank holiday weekend.

That follows a calmer day's trading in Japan, where the Nikkei finished 1.2% higher – clawing back some of last week's dramatic losses.

Other European markets are also rallying, with Germany's DAX and the French CAC up around 0.7%, while the Spanish and Italian markets are both 1.5% higher.

Traders seem to be content that central banks will maintain their stimulus measures for a while longer.

Early this morning, Bank of Japan board member Ryuzo Miyao said the BoJ would remain firm, despite the market turmoil of recent days. Miyao argued that investors should not be spooked by rising Japanese bond yields.

Even when there is upward pressure on long-term interest rates due to expectations for economic recovery, monetary policy will continue to put downward pressure on interest rates and therefore strongly support economic recovery.

And yesterday, the European Central Bank's Jorg Asmussen said the ECB wouldn't tighten policy soon:

Our monetary policy is expansive and will remain so as long as necessary. But to keep rates low for too long would create new risks.

A man walks by an electronic stock board of a securities firm in Tokyo, Tuesday, May 28, 2013.
An electronic stock board in Tokyo, where the Nikkei finished 169 points higher, up 1.2%. Photograph: Itsuo Inouye/AP

8.34am BST

The New Deal – what we know

Some details of this 'New Deal' for youth unemployment have emerged in the media in recent days.

Here's a few articles:

Bloomberg: Franco-German Youth Jobs Push Seeks to Damp National Differences

Germany and France plan to present a joint blueprint today to address soaring youth unemployment as Europe’s two biggest economies seek to find common ground in response to the euro region’s financial crisis.

“Almost 6 million unemployed young people — these are dramatic figures,” German Labor Minister Ursula von der Leyen said in an ARD television interview on May 26. “These young people need an answer now.”

The Telegraph: 'New Deal' to tackle Europe's mass youth unemployment

The "New Deal for Europe" will free up EU resources to pay for language courses and fund jobseekers' flights around the continent in search of work.

Germany is increasingly concerned about the need to rescue the country's image, and show greater solidarity with southern Europeans suffering a prolonged economic crisis.

EurActiv: Commission denies Germany's 'dangerous' criticism of youth jobs fight

As Germany and France meet today over a joint youth employment initiative, EU officials have rebuffed as “groundless” and “dangerous” criticism from the German finance minister that the Commission is failing to address joblessness, EurActiv Germany reports.

Ministers from both countries will unveil in Paris the initiative blueprint and allow the European Investment Bank to unlock billions of euros in loans to companies to create jobs for young people.

The proposals have been called a “New Deal for Europe” and echo the drive by President Franklin D. Roosevelt to cut United States unemployment in the 1930s, the Rheinische Post reported this month.

But sources say German Finance Minister Wolfgang Schäuble has angered the president of the European Commission, José Manuel Barroso. Schäuble’s complaint that the Commission has been ineffective in its approach towards fighting youth unemployment has not gone down well amongst other EU officials either.

Updated at 8.35am BST

8.16am BST

A New Deal for joblessness

Good morning, and welcome to our rolling coverage of key events in the eurozone and across the global economy and the financial markets.

Europe's youth unemployment crisis takes centre-stage today as Germany and France announce plans for a "New Deal" for the millions of young people out of work across the region.

Almost one in four young people are out of work in the eurozone, and the scale of the problem appears to have shaken politicians into action.

German finance minister Wolfgang Schäuble, and his French counterpart Pierre Moscovici, will meet in Paris today to agree a package of measures to address youth unemployment.

The plan is expected to focus on countries with the highest jobless rates, such as Greece and Spain. It could include creating more apprenticeships to get young people into the workplace – an area where Germany excels already – and more funding for small firms to help them hire young people.

It could also provide support for jobseekers to move across the eurozone to find work.

The scheme is also expected to involve the European Investment Bank and tap a €6bn fund set aside to address youth unemployment in the EU budget.

But will the scheme be ambitious enough to tackle a problem that is creating a lost generation and, many fear, threating social cohesion across the region?

I'll be tracking events in Paris through the day, along with other important developments across Europe and beyond.

Updated at 8.29am BST

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In the trading room today: Will the EUR Break Outside of Its Range vs USD? As the EUR/USD exchange rate continues to fluctuate within its recent range, we examine the factors that could serve as catalysts that could trigger the next big move for the euro and ponder the direction of the impending breakout, we analyze the latest trend developments in the EUR/USD currency pair, we note the renewed strength of the USD vs JPY, we keep an eye on the GBP/USD pair, we highlight the market’s reaction to the Bank of Japan Meeting Minutes and the French Consumer Confidence Index, we discuss new forecasts by Bank of America-Merrill Lynch and UBS, and prepare for the trading session ahead.

May 26, 2013 (By Marcus Holland of Financialtrading.com) – Yields in the UK have been rising despite the recent selloff of riskier assets as investors continue to ponder how the MPC will deal with the UK economy once Carney takes the helm of the BoE.  The pound moved lower on Wednesday after the Bernanke testimoney as most riskier assets moved to the defensive.

Minutes from the Bank of England’s interest rate decision meeting were released with no real surprises during the middle of the week. The hawkish view remains on the MPC and the vote of 6-3 in favor of the status quo reflects that view.   The disappointing retails sales shows the economy is in desperate need of stimulus, despite a MPC that does not feel that way.  The 1.3% decline in April retail sales was the biggest in a year, compared with a forecast of 0.1% increase.

UK yields have started to tick higher throughout May after declining to the lowest levels seen since the summer of 2012.  The increase in yields are a reflection of a better than expected GDP report and a MPC that refuses to become more accommodative.

Despite increasing UK yields, the differential between the US and the UK is contracting.  The 10-year yield spread has contracted below par.  A break below this level would makes it more difficult to hold the pound, as traders will need to pay away by holding short positions in US yields.  The dollar has lost strength relative to most major currencies allow the pound to rebound slightly.

Friday’s better than expected durable goods orders failed to help the dollar gain ground again the pound.  The 3% increase was much better than the 1.3% expected by economists.  The surge in durable goods was mainly caused by a bump in commercial and residential aircraft.  Excluding these items durable good was in line with expectations.

Technically the pound is testing support levels near 1.50, a close below this level would likely test the lows made in early March near 1.48.  Resistance on the GBP/USD is seen near the 10-day moving average near 1.5130.

Momentum on the GBP/USD is negative with the MACD printing in negative territory.  The trajectory of the MACD is negative and is printing at the lowest level seen during 2013.  The MACD generated a sell signal in early May when the spread crossed below the 9-day moving average of the spread.  The RSI (relative strength index) which is an oscillator that measures overbought and oversold levels is printing near 40 which is on the low end of the neutral range.