Eurozone crisis live: Markets slide after rollercoaster session in Japan

UK FTSE 100 down 0.6% in morning trade. ECB’s Draghi calls for more European UK. German Ifo business confidence index rebounds and beats the forecasts with a reading of 105.7 in May. US durable goods orders for April rise more than expected…

Powered by article titled “Eurozone crisis as it happened: Markets slide after rollercoaster session in Japan” was written by Josephine Moulds and Nick Fletcher, for on Friday 24th May 2013 17.00 UTC

6.00pm BST

Cyprus takes another step to easing capital controls

Developments in Cyprus where authorities have decided to ease restrictions on capital controls. Helena Smith says:

Two days after Central Bank of Cyprus Governor Panicos Demetriades announced that the island would “gradually” relax the capital controls it has been forced to adopt since being bailed out in March, authorities took the step of further easing restrictions on foreign banks.

The finance ministry said controls would no longer apply for two major Middle Eastern banks operating on the island. As of today, international clients would be able to make money withdrawals and transfers from Lebanon’s Byblos Bank SAL and Jordan’s Arab Jordan Investment Bank SA, it said.

Resident clients in Cyprus, however, will still face restrictions including a €300 daily cash withdrawal from their accounts.

Cypriot authorities implemented the controls fearing a run on the island's banks after the EU and IMF forced depositors with more than 100,000 euro in their accounts to participate in the €23bn bailout.

Addressing the thorny issue earlier this week, Demetriades said relaxing the restrictions could only be done “gradually”

 “Eliminating restrictions too abruptly can lead to disruptive outflows and liquidity problems in the banking sector,” he said in a speech in Nicosia, the island’s divided capital.

In a separate speech, the Cypriot finance minister Haris Georgiades said he regarded the restrictions as Cyprus’ biggest short-term problem and pledged that the country would work “to steadily relax” them.

“I don’t believe in prolongation” of the controls, he said. Cyprus is the first eurozone country to enforce such restrictions. 

And on that note it's time to close up for the evening. Thanks for all your comments and we'll be back next week.

5.26pm BST

European markets on the slide again

Thursday's declines have continued although not at the same pace, as investors remained cautious about the outlook for the continuation of central actions to stimulate the global economy. Here's the closing scores:

• The FTSE 100 finished 42.45 points or 0.63% lower at 6654.34 (more here on the week's volatile performance)

• Germany's Dax fell 0.56% to 8305.32

• France's Cac closed 0.26% lower at 3956.79

• Italy's FTSE MIB dropped 0.66% to 16,896.81

• Spain's Ibex lost 0.95% to 8264.6

Meanwhile the Dow Jones Industrial Average is currently down 33 points or 0.22%.

Updated at 5.26pm BST

4.16pm BST

4.04pm BST

An invitation

The Guardian’s news community team are hosting a meet-up event at at
the Guardian’s offices at Kings Place in London. The setup will be
informal – with drinks and nibbles and a chance to get to know other
readers who contribute to our live blogs, followed by a Q&A with the
Guardian liveblogging team.

Unfortunately we've had to move the day, so it's now taking place on
Tuesday June 4th from 6pm to 9pm. If you're interested in attending, please email:

Updated at 4.15pm BST

3.29pm BST

Number of Greeks relocating to Germany jumps 43%

Going where the streets are – thought to be – paved with gold? From ekathimerini:

Some 34,000 Greeks relocated to Germany last year, an increase of 43% compared to 2011 when 23,800 Greeks moved there, according to German government statistics.

It is not only Greeks who are increasingly seeking a better life in prosperous Germany but an growing number of people from other debt-hit countries in southern Europe. Last year, 29,000 Spaniards, 42,000 Italians moved to Germany, according to German government statistics. The largest influx, however, was from central Europe, with 176,000 Poles, 116,000 Romanians and 59,000 Bulgarians relocating to various parts of Germany.

In total more than a million new immigrants arrived in Germany in 2012, the largest influx since 1995. The average age of the migrants is 32.

3.05pm BST

US markets open lower

Despite the better than expected US durable goods figures, Wall Street is joining the downward trend.

After half an hour or so or trading the Dow Jones Industrial Average is around 80 points lowere, a 0.5% decline.

And elsewhere:

• The FTSE 100 is down 0.74% at 6647

• Germany's Dax is down 0.54% at 8306

• France's Cac is down 0.01% at 3966

• Italy's FTSE MIB is down 0.85% at 16,865

• Spain's Ibex is down 1.44% at 8224

Updated at 3.06pm BST

2.37pm BST

Portugal may need targets eased, says prime minister

Portugal is set to meet its deficit targets for this year, its prime minister said earlier, but may need an easing of the bailout terms in 2014.

After agreeing a €78bn bailout in 2011, the country has to reduce its deficit to 5.5% of GDP this year, to 4% in 2014 and 2.5% in 2015. These targets have already been eased in March to take account of Europe's worse than expected recession.

Prime minister Passos Coelho told parliament, as reported by Reuters:

The government does not rule out that further flexibility of the goals may be required for 2014.

Our obligation is to do all in our reach to meet what has been agreed as the preferred target. {But] we have already achieved some flexibility before…and it can't be ruled out that further flexibility may become important for 2014.

That's a yes, then.

Portugal's prime minister Pedro Passos Coelho at the Portuguese parliament. Photograph: AP Photo/Francisco Seco
Portugal’s prime minister Pedro Passos Coelho at the Portuguese parliament. Photograph: AP Photo/Francisco Seco

1.58pm BST

Mervyn King calls for

Outgoing governor of the Bank of England Mervyn King said the two sides of the debate on growth vs austerity have exaggerated the difference between their positions. Speaking in Helsinki, King said:

What we need is more common sense. This debate has been vastly exaggerated by people who want to make political arguments.

His timing is interesting, coming two days after the IMF urged chancellor George Osborne to focus on growth and delay austerity. 

Any excuse to wheel out this picture... Mervyn King riding a dog sled in Canada in 2010. King says the growth vs austerity debate has been exaggerated.
Any excuse to wheel out this picture… Mervyn King riding a dog sled in Canada in 2010. King says the growth vs austerity debate has been exaggerated. Photograph: Fred Chartrand/AP

And on that note, I'm handing over to my colleague Nick Fletcher.

Updated at 2.11pm BST

1.45pm BST

US durable orders (excluding transport) rose 1.3% in April

Bloomberg has (already) got a story up on the US durable goods numbers (see 1.34pm).

Alex Kowalski writes:

Bookings for commercial aircraft climbed 18.1% last month after slumping 43% in March, today’s report showed. Boeing Co. (BA), the Chicago-based aerospace company, said it received 51 orders last month, up from 29 in March.

Excluding the more volatile transportation equipment component, durable orders climbed 1.3%, the first gain in three months.

Bookings for non-defense capital goods excluding aircraft, considered a proxy for business investment in items such as computers, engines and communications gear, increased 1.2% after a 0.9% gain the prior month that was previously reported as a drop.

1.36pm BST

As Joe Weisenthal of Business Insider notes, that is the 6th piece of economic news out of the US that has beaten expectations.

1.34pm BST

US brightens on cheery durable goods data

US durable goods orders for April are in and they are much better than expected.

This is the survey that measures the value of orders placed for relatively long-lasting goods, like cars and TVs. Because consumers hold off from buying these kind of things in a recession, it's a good gauge of consumer confidence.

Analysts were expecting a 1.5% increase from the previous month, but they rose 3.3%. That compares with a 6.9% decline in March.

12.16pm BST

Italian consumer confidence drops

Italian consumer confidence dropped unexpectedly in May, reversing a rise in April, as the country remains mired in recession.

ISTAT's consumer confidence index dropped to 85.9 in May from 86.3 in April. Reuters reports:

Consumer spending has long been an Achilles heel of the Italian economy, which has been the most sluggish in the eurozone for at least a decade.

ISTAT reported on Wednesday that people living in families considered to be seriously deprived have doubled in the past two years to 8.6m, or about 14% of the population, as a long recession has eaten into Italians' spending capacity.

Consumer confidence in Italy dropped unexpectedly in May.
Consumer confidence in Italy dropped unexpectedly in May. Photograph: David Noton Photography/Alamy

11.53am BST

EU states must be allowed to fail – ECB’s Weidmann

The EU must allow states to go bankrupt, ECB board member Jens Weidmann says. Newswire MNI has the following lines from his speech in Paris.

He says budget consolidation through spending cuts enhances growth, it can support confidence and lead to lower interest rates. By contrast, he says high levels of public debt are bound to hurt growth.

Returning to his theme from last night's speech (see 8.59am), he warns that high levels of debt can divert central banks from price stability. And he says anchored inflation expectations do no ensure future stability.

On the ECB's outright monetary transactions – its tool to keep bond yields in check by buying up the bonds of crisis-hit states in the secondary markets – he says it remains to be seen if the benefits outweigh the risks. 

Jens Weidmann, president of the Bundesbank and ECB board member, says EU states should be allowed to fail.
Jens Weidmann, president of the Bundesbank and ECB board member, says EU states should be allowed to fail. Photograph: ALASTAIR GRANT/POOL/EPA

10.52am BST

Markets dip despite buoyant Germany

The markets have (largely) turned negative again, despite an upbeat German business confidence survey.

UK FTSE 100: down 0.7%, or 46 points, at 6651

German DAX: down 0.4%

France CAC: up 0.14%

Italy FTSE MIB: up 0.05%

Spain IBEX: down 0.5%

10.44am BST

Draghi’s speech – the highlights

The ECB has posted a link to Mario Draghi's speech last night.

He started with a quote to grab the headlines:

Europe needs a more European UK as much as the UK needs a more British Europe.

Then went on to explain why, with a series of statistics highlighting their interdependency. Among these was the following.

The euro area is the UK’s largest export market. It may not come as a surprise to you by now that no less than 40% of all the goods and services exported by UK businesses are delivered to euro area countries. In 2012 this amounted to 240 billion euros, or just short of £200bn.

Draghi sees some reasons to be cheerful.

Today we are seeing some encouraging signs of tangible improvements in financial conditions. Spreads in sovereign and corporate debt markets have narrowed considerably. Banks in stressed countries have seen the deposits placed with them by euro area non-banks increasing by about 200 billion euro since August 2012.

Mario Draghi says Europe needs a more European UK as much as the UK needs a more British Europe.
Mario Draghi says Europe needs a more European UK as much as the UK needs a more British Europe. Photograph: STEFAN WERMUTH/Reuters

But, he says, economic conditions remain "challenging". He calls for further progress in establishing a Europe-wide banking union, in order to "sever the link between banks and their respective sovereigns". It is, he says, "this link that lies behind the fragmentation in the financial markets of the euro area".

Although he applauds the progress made so far, he says the region must create a Single Resolution Mechanism, to manage the failure of banks within Europe. Draghi says:

Such a mechanism, much like the FDIC in the US, could give markets certainty about the ranking of creditors and the procedures that would be followed in the case of a bank resolution.

This will benefit all EU members, he says. He concludes with another headline-grabber:

The answer to the crisis has not been less Europe but more Europe.

This is a time when the strength of all our institutions is being tested; first, by the financial crisis, then by the recession. The European Union and the European Monetary Union are no exceptions. The choice is between adapting them to the new conditions or do nothing and risk their dissolution.

10.17am BST

UK mortgages data points to house price rise

Back in the UK, figures on mortgages from the British Bankers' Association point towards a slight increase in house prices this year.

The BBA said mortgage approvals rose in April to stand 0.9% higher than a year ago, although net lending fell. Howard Archer of IHS Global Insight writes:

The rise in mortgage approvals in April reported by the BBA data support belief that house prices are likely to achieve a modest gain of a few per cent or so over 2013, as activity gradually picks up supported by initiatives such as the Funding for Lending Scheme and Help to Buy.

However, while a moderate rise in house prices over 2013 looks increasingly probable, a strong upward move still seems unlikely given an ongoing challenging and uncertain economic environment despite the recent signs of moderate improvement. In particular, weak earnings growth and still relatively low and fragile consumer confidence argues against a marked rise in house prices for some time to come.

9.46am BST

Manufacturing confidence picks up in France

Things are picking up even in beleaguered France. Confidence in the country's manufacturing industry picked up more than expected in May, rising to 92 from 88 the previous month, beating expectations of a reading of 89.

But broader business confidence held steady at its lowest level since August 2009. The national statistics office said the broader indicator of overall business confidence remained unchanged at 84.

Julien Manceaux at ING writes:

All in all, it seems that even if manufacturers remain very downbeat, slowly improving order books and decreasing stocks could finally boost activity in the manufacturing sector in the second half of this year. This in turn could lead to a slow recovery in the service sector, the main provider of jobs and investments, whose activity continues to contract: the PMI for the service sector in May was stable at 44.3, which is much lower than the average it reached in the last quarter of the year when the economy was contracting. Even if today’s data are encouraging, they are no more than the first green shoots for the Ayrault government.

9.28am BST

German business survey adds to brightening picture for eurozone – economist

Here's Christian Schulz on that upbeat IFO survey out of Germany (see 9.11am)

German business confidence rebounded healthily in May from recent setbacks. The soft patch in March and April, when the Italian political stalemate and the chaotic Cyprus bail-out had raised fears of a return of the euro crisis, has dissipated.

However, while the assessment of the current situation of the economy jumped to 110.0, almost back to the February peak and indicating healthy growth, businesses remained more cautious about the outlook.

He says the wider eurozone should benefit from growing confidence in Germany.

German domestic strength is good news for the Euro crisis countries, as it raises the chances that they can capitalise on their regained competitiveness via stronger exports. At the same time, it reduces the pressure on the ECB to do more after the May interest rate cut. Rising PMIs, confidence in France (business confidence rose from 88 to 92 in May) and slightly stronger Eurozone consumer confidence (reported yesterday) add to the brightening picture for the Eurozone.

9.20am BST

Olive oil spat resolved

To the serious matter of the great olive oil debacle. Bloomberg is running a story on how olive oil displaced debt at the heart of the European bottleneck. James Neuger reports:

It had the same ingredients as Europe’s debt-crisis drama: a battle between north and south, British defiance, media jeering, and murky decision-making starring a cast of unidentified technocrats.

The conflict was put to rest yesterday: the European Union decreed that restaurants in its 27-nation market can continue to put refillable olive-oil bottles on tables, dropping a ban that was scheduled to take effect in 2014.

A week after a little-known committee endorsed the mandate, EU Agriculture Commissioner Dacian Ciolos scuttled it, pledging instead a regulation that “takes account of the lives of everyone, not only some, to avoid this sort of misunderstanding.”

The olive oil caper of 2013 will go down in history along with now-retracted bans on misshapen vegetables and criminal penalties for grocery-store disregard of the metric system as examples of European rules run amok — even if many tales of EU over-regulation are more fiction than fact.

The offending item. The European Union decreed on Thursday that restaurants in its 27-nation market can continue to put refillable olive-oil bottles on tables, dropping a ban that was scheduled to take effect in 2014.
The offending item. The EU decreed on Thursday that restaurants in its 27-nation market can continue to put refillable olive-oil bottles on tables, dropping a ban that was scheduled to take effect in 2014. Photograph: Geert Vanden Wijngaert/AP

9.11am BST

Sticking with Germany, the IFO business confidence survey came in at 105.7, compared with forecasts of 104.5.

The boost came from the index that measures sentiment regarding the current economic conditions, which rose to 110, compared with forecasts of 107.2. The business expectations index was unchanged at 101.6.

Traders welcomed the release.

8.59am BST

Weidmann warns against central banks propping up governments

Bundesbank president and ECB board member Jens Weidmann has said central banks must be wary of guaranteeing the solvency of governments, in case they find themselves unable to control invlation. Also speaking late last night, Weidmann said:

If the debt sustainability or solvability of the state appears to be upheld only by the interventions of the central bank, then the central bank is committed to that goal and cannot really deliver on its primary goal of price stability.

Germany's Bundesbank president Jens Weidmann says central banks should be wary of guaranteeing the solvency of governments.
Germany’s Bundesbank president Jens Weidmann says central banks should be wary of guaranteeing the solvency of governments. Photograph: KAI PFAFFENBACH/REUTERS

Financial markets newswire MNI reports:

Citing the example of the Bank of Japan, which is buying up 70% of the debt issuance of the government, Weidmann warned that "monetary policy can be pushed into a very difficult spot", where it cannot "free itself from the embrace of fiscal policy."

"Once you're in this game, it is very difficult to get out," he said. "And that's why we need solid public finances in Europe!"

Some have come to view monetary policy as a "sort of silver bullet" to tackle structural problems that the politicians seem unable to resolve rapidly, Weidmann observed. But unless structural reforms are pursued, there is no reason for the central bank to buy them time.

Updated at 9.01am BST

8.50am BST

Draghi calls for more European UK

ECB president Mario Draghi called for "a more European UK", when he spoke to a City of London audience last night. In a speech at the City of London Corporation, he said:

I cannot say which of the two sets of arguments is stronger, the economic or the political ones, neither am I going to enter into a domestic policy debate, but what I can say is that Europe needs a more European UK as much as the UK needs a more British Europe.

ECB president Mario Draghi says European needs a more European UK as much as the UK needs a more British Europe.
ECB president Mario Draghi says European needs a more European UK as much as the UK needs a more British Europe. Photograph: Pool/Getty Images

The speech, which was met with applause, comes as the Conservative party finds itself deeply divided over the issue of Europe.

Draghi refrained from making a direct call for the UK to stay in the EU but instead called on European countries to redouble efforts to agree the terms of a banking union, insisting it would benefit “all EU members” including the UK. He said:

The answer to the crisis has not been less Europe but more Europe.

8.31am BST

Bank of England’s Fisher downbeat on Britain’s prospects

Bank of England policymaker Paul Fisher had a gloomy message this morning, saying the UK economy is likely to remain sluggish for years to come. Our economics editor Larry Elliott reports:

Fears that Britain faces years more weak growth were raised by a leading Bank of England policymaker when he warned that adjustment to the tougher post-crisis climate was only two-thirds to three-quarters complete.

Speaking in Cardiff on Friday, Paul Fisher said there had been nothing to compare with the recent sluggish performance of the economy since modern quarterly growth data was first produced in 1955.

"It is as if the different groups within our society – households, businesses, banks and the government – have all decided that their future financial positions, on average, will be worse than they thought before the crisis", said Threadneedle Street's director for markets.

Fisher added that the willingness of people to accept cuts in their living standards was explained by their downbeat view of the future.

Fisher is one of the three members of the monetary policy committee, who has been pushing the bank to provide additional stimulus to the economy. 

Paul Fisher suggests the UK could face years more weak growth.
Paul Fisher suggests the UK could face years more weak growth. Photograph: Bloomberg/Bloomberg via Getty Images

8.16am BST

German escapes recession, but only just

The German statistics office confirmed this morning that German GDP rose 0.1% in the first quarter, following a 0.7% decline in the last three months of 2012. That means it avoided a recession (defined as two consecutive quarters of contraction) but only just.

Growth was driven by private consumption, which rose 0.8% on the previous month, while construction investment dropped 2.1%. Exports were 1.8% lower on the quarter, but still contributed 0.1% to first quarter growth.

Carsten Brzeski of ING said:

German consumers remain the silent helpers of the economy. Often forgotten, ignored and labelled as had-beens, German consumers have become an important growth driver. In fact, private consumption grew in each since quarter since 1Q 2012.

Unfortunately, the positive trend of private consumption is anything but a spending spree and Germans are still unlikely to become a bunch of shopaholics. This means that despite all delight, this morning’s data also hold an inconvenient truth which interdicts any euphoria: without its exports, the German economy is currently only like a sports car without sixth gear.

Consumer confidence is, however, rising, suggesting there is more growth in store. The GfK consumer confidence index for June rose to 6.5, its highest level since September 2007, from 6.2 in May.

Christian Schulz of Berenberg Bank writes:

In 2013, Germany will have to rely largely on domestic demand for growth. With consumption showing signs of strength and some bounce-back in investment after the long winter, the outlook for domestic demand is brightening.

Updated at 8.34am BST

8.05am BST

European markets open higher

The markets have opened and everything is looking a bit brighter today, after Japanese shares stabilised overnight.

UK FTSE 100: up 0.24%, or 16 points, at 6713

Germany DAX: up 0.4%

France CAC 40: up 0.5%

Italy FTSE MIB: up 0.8%

Spain IBEX: up 0.6%

8.01am BST

Today’s agenda

We've already had the detailed release of German GDP and some consumer confidence numbers – more on those shortly – and there's more data out of the eurozone's largest economy later today.

  • German GDP (Q1): 7am
  • German GfK consumer confidence (June): 7am
  • German IFO business sentiment survey (May): 9am
  • Italian consumer confidence (May): 9am
  • ECB's Costa speaks: 9am
  • UK BBA mortgage data (April): 9.30am
  • ECB's Weidmann speaks: 11am
  • Mervyn King speaks on lessons from the crisis: 12.30pm
  • ECB's Constancio speaks: 1.30pm
  • US durable goods orders (April): 1.30pm

In the debt markets, we've got the weekly announcements about how much banks have paid back of their cheap LTRO money from the ECB, and the UK is selling £2.5bn of short-term debt.

7.41am BST

Good morning and welcome to our rolling coverage of the eurozone crisis. Markets are expected to be calmer this morning after Japan's Nikkei stabilised overnight.

Traders in Tokyo had another dramatic day – with the index swinging wildly from a 3.5% rise to a 3.5% drop at one stage – but it settled down in the afternoon to close 0.9% higher.

We'll be keeping a close eye on the markets and following economic events around the world as the day goes on.

Updated at 7.45am BST © Guardian News & Media Limited 2010

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