July 11 2013

In the trading room today: Will the Fed Chairman’s Comments Change the USD Trend? Following yesterday’s dovish comments by the Fed Chairman Ben Bernanke, we examine the impact on the USD from the Fed’s promise of a “highly accommodative monetary policy for the foreseeable future”, we analyze the spike in the EUR/USD currency pair, we note the jump in the GBP/USD pair, we keep an eye on the decline of the USD vs JPY, we highlight the market’s reaction to the FOMC Meeting Minutes and the Bank of Japan interest rate announcement, we discuss new forecasts from Bank of Tokyo-Mitsubishi and Morgan Stanley, and prepare for the trading session ahead.


Shares rise after Federal Reserve chairman says stimulus measures may continue longer than expected. Luxembourg’s Juncker to resign over spying scandal. Weidmann: We’re not Odysseus on rates. Greek unemployment hits record high…


Powered by Guardian.co.ukThis article titled “Bernanke sends markets rallying, as more protests held in Greece – eurozone crisis as it happened” was written by Graeme Wearden, for theguardian.com on Thursday 11th July 2013 15.53 UTC

6.18pm BST

And finally…..

Over on Wall Street, shares are also enjoying a Bernanke pick-me-up.

The Dow Jones industrial average is up 137 points, or 0.9%, at 15428. Finish there and it'll be a new record closing high for the Dow.

And European readers can tune in tomorrow morning to see if it made it! But with the markets closed, and the eurozone looking quiet, I'm shutting up for the day. Good night, and thanks. GW

6.07pm BST

More Greek strikes

Another example of industrial action in Greece – medical staff have called two one-day strikes for later this month.

The protest is against the government's plan to move 2,500 health sector workers into the 'mobility scheme' — where they will receive lower wages and could be dismissed if they don't take another job.

Kathimerini has more details:

State hospitals and the ambulance service will be operating on a reduced staff next Tuesday after the union representing hospital employees and the National First Aid Center (EKAB) called a 24-hour walkout to coincide with a general strike on that day and a second 24-hour walkout the following Wednesday, July 24.

As reported at 2.32pm, police officers and teachers both held protest rallies in Athens today – against the mobility scheme.

The government, though, has introduced legislation to bring the programme into law, which should be voted on next week.

5.29pm BST

Bernanke bounce sends shares up — markets close

Biggest risers on the FTSE 100, July 11, at the close
The biggest risers on the FTSE 100 today. Photograph: Thomson Reuters

European stock markets have closed at their highest level since early June, as the Bernanke Bounce lasted until the closing bell.

And with Wall Street still buoyant, it's possible that the US indices will close at new record highs late tonight.

Mining stocks helped to push the FTSEurofirst to a five week high. The prospect of the Fed 'tapering' its bond purchases more slowly – ie, stimulating the US economy more vigorously for longer – cheered the City.

• FTSE 100: up 38 points at 6543, +0.58%

• German DAX: up 92 points at 8158, + 1.1%

• French CAC: up 28 points at 3868, +0.75%

• Spanish IBEX: up 35 points at 8030, +0.45%

• Italian FTSE MIB: flat

David Jones, chief market strategist at IG, explains:

The US Federal Reserve’s chairman Ben Bernanke did a stellar job in taming the recent downside bias that came from the volatility in equity markets.

The mere phrase that we would see ‘a highly accommodative policy’ for the foreseeable future gave relief to investors, and was sufficient to charge risk sentiment and send indices rocketing up sharply.

However, the Portuguse stock market fell by 2%, hit by political instability fears after its president called for all political parties to create a "national salvation" deal (details here).

Bank shares led the fallers, with Banco Internacional do Funchal tumbling by 13%.

Updated at 5.29pm BST

4.52pm BST

Video: Portuguese protests

Here's a video clip of the protests in the Portuguese parliament this afternoon — showing a group of demonstrators chanting and clapping, and throwing paper (i think) as they urged MPs to resign:

Via Economico

Updated at 4.53pm BST

4.42pm BST

Reports of protests in the Portuguese parliament this afternoon, via local journalist José Miguel Sardo.

Another sign of the tension in Lisbon, after the Portuguese president called for parties to work together to keep the country afloat (see 12.26pm).

4.26pm BST

US Treasuries strengthen….and why it matters to Europe

Ben Bernanke's comments last night has sent US government bond prices up, reversing the recent rise in Treasury yields, as bond traders anticipate the Fed's bond-buying programme lasting longer.

The yield on US 10-year bonds has dropped to 2.608%, from 2.68% last night. That's still much higher than 1.4% reached a year ago, but pretty low in historical terms.

German and UK sovereign debt has also strengthened.

And Ashot Tsharakyan, Economist at Moody’s Analytics, says that shows why we should all watch events in the US:

European investors should follow the U.S. economy closely, and also that U.S. policymakers should understand that what they say affects Europe.

Clear central bank communication, well in advance of any change in policy, will be critical. Although the U.S. economy is strengthening, the euro zone remains fragile. Rising sovereign bond yields pose a risk to the stability of the global financial system and to the euro zone’s highly indebted economies, which are plagued by high unemployment, tight credit, and fiscal austerity.

According to the Bank for International Settlements a rise of 3 percentage points in bond yields would cost U.S. investors more than trillion, equal to 8% of GDP. This is large, but a similar rise would be much more damaging around the world, costing creditors of France, Italy, Japan and the U.K. the equivalent of 15% to 35% of those countries' GDP.

Updated at 4.40pm BST

3.59pm BST

Greek PM to visit Washington

Greek prime minister Antonis Samaras will get the red carpet treatment in Washington next month, when he visits President Obama.

The visit, announced today, will see the two leaders discuss "Greek-US defense cooperation, the Transatlantic Trade and Investment Partnership, regional cooperation, mutual counterterrorism efforts".

The two men will also discuss development in North Africa and Syria, and the division of Cyprus, according to the White House.

No mention of the debt crisis — a sign of how the prospect of Greece quitting the eurozone has faded from the agenda.

3.24pm BST

Record highs on Wall Street

Assoiciated Press sums up the early action on Wall Street:

The stock market is rising to record highs after Federal Reserve Chairman Ben Bernanke said the central bank would continue to support the U.S. economy.
The Dow Jones industrial average was up 151 points, or 1 percent, to 15,443 after the first few minutes of trading Thursday.
The Standard & Poor's 500 index rose 17 points, also 1 percent, to 1,670.
The early advance put the Dow and S&P above their previous record closes set in May.
All 10 industry groups in the S&P 500 rose.
Investors also bought bonds after being reassured that the Fed was not in a hurry to pull back on its huge bond-buying program.
The yield on the benchmark 10-year Treasury note fell to 2.59 percent from 2.63 percent late Wednesday.

Updated at 3.24pm BST

2.42pm BST

US shares rally at the open

US shares have jumped at the start of trading in Wall Street. Both the Dow Jones index and the S&P 500 have risen around 1% to levels above their record closing points.

Clearly Ben Bernanke's comments last night about maintaining highly accomodative monetary polcy have been well received by US traders, as well as those in Europe (where the FTSE 100 is up 0.5%, and the German DAX is 1.2% higher).

Bernanke's dovish words must have shaken any bearish traders….

Updated at 2.47pm BST

2.32pm BST

Photos: Protests and public anger in Greece

It's another day of protests in central Athens, as opposition to the government's civil service job cuts plans refuses to be subdued.

Hundreds of municipal police officers drove through the capital on motor bikes, unhappy about plans to put thousands of their number into the mobility pool (the first stage towards redundancy):

Municipal police officers protest outside the parliament in central Athens during a rally against public sector layoffs the government has promised its international lenders in exchange for bailout funds, July 11, 2013.
Hundreds of striking municipal police officers drive their motorbikes as a protester holds a Greek national flag during a protest in front of the greek parliament in Athens on July 11, 2013.
Photograph: LOUISA GOULIAMAKI/AFP/Getty Images

A group of teachers also held a protest rally in front of the Greek Parliament, holding banners with slogans such as "It's enough" and "No to demolition of public education"

Teachers hold placards reading' no to demolition of public education' and 'its enough'   while  participating in  a protest rally in Athens on July 11, 2013.
Photograph: LOUISA GOULIAMAKI/AFP/Getty Images
School teachers and municipal workers protest in the center of Athens.
Photograph: Aristidis Vafeiadakis/ZUMA Press/Corbis

And a new opinion poll has found little public support for the newly reshuffled government in Athens, even within supporters of the two parties in the coalition. 

According to the poll, only 23% of Greeks have a positive view of the recent government reshuffle the poll found. Forty seven percent of New Democracy supporters saw the shake-up in a positive light, compared to 41% among Pasok voters.

More here on eKathimerini: Ruling conservatives ahead of leftist opposition, poll shows

2.06pm BST

The share rally in London has turned sour for two outsourcing companies, G4S and Serco, who are accused of overcharging the UK government by tens of millions of pounds on a contract for tagging offenders

Serco and G4S are leading the FTSE 100 fallers after the justice secretary, Chris Grayling, called in the Serious Fraud Squad. He told MPs that both companies had charged for monitoring people who were back in prison and had had their tags removed, people who had left the UK, and some who had never been tagged.

And that wasn't the worst of it, as home affairs editor Alan Travis reports:

"There are a small number of cases where charging continued for a period when the subject was known to have died," the justice secretary told MPs.

Serco shares have now tumbled 6.3%, while G4S has shed over 3%.

1.49pm BST

US jobs data

The number of Americans filing new jobs claims has risen to a two month high, according to data just released.

Last week's US jobless new claims total came in at 360,000, an increase on the 344,000 in the previous seven days, and dashing hopes that it would drop to 340,000.

However, that figure still suggests the US labour market is slowly healing – one of the key measures that Ben Bernanke and the Federal Reserve will use when deciding when to slow its stimulus measures.

1.28pm BST

Some lunchtime fun…the Bank of England has launched a new application that lets you explore its corridors and vaults from the comfort of your own smartphone or computer.

My colleague Maev Kennedy reports:

A panoramic tour on the app shows the stacks of shining gold bars, each weighing around 13kg and valued at about £350,000 – the price of gold fluctuates constantly and is fixed twice a day.

The vaults hold about 400,000 gold bars, almost all of which are owned by other banks. A small percentage belongs to the government and to the bank itself – including two Roman gold bars on display in the bank's museum.

More from Maev here: Bank of England welcomes you into its vaults – via an app

And you can play at being Mark Carney by clicking here (six-figure salary and housing allowance not included).

1.04pm BST

Wall Street traders predict that the main stock indices will follow Europe's lead by rising by around 1% when trading begins in 90 minutes time – details here.

12.49pm BST

In Athens, municipal policewomen have held a protest outside the headquarters of the co-ruling New Democracy party, in the latest demonstration against planned public sector job cuts:

Municipal policewomen hold Greek flags as they protest outside the headquarters of co-ruling New Democracy party during a rally against public sector layoffs the government has promised its international lenders in exchange for bailout funds, in Athens July 11, 2013.

12.26pm BST

Portuguese president’s cross-party deal call causes alarm

Portugal's President Anibal Cavaco Silva makes a statement to the media at Belem Palace in Lisbon July 10, 2013.
Portugal’s president Anibal Cavaco Silva speaking last night at Belem Palace in Lisbon. Photograph: RAFAEL MARCHANTE/REUTERS

Portugal appears to be gripped by political instability, after the country's president called for all parties to work together to guide it out of its bailout programme.

Last night, Aníbal Cavaco Silva said a “national salvation” deal between the coalition government and the opposition socialist party was needed.

The time has come for politicians to assume their responsibilities. The decisions taken in the next few days will affect Portugal’s future in the year ahead.

Cavaco Silva added that a deal was needed to guarantee Portugal's governability and debt sustainability.

This has caused surprise in Portugal, as the president was expected to simply endorse the reshuffled government hammered out between prime minister Pedro Passos Coelho and coalition partner Paulo Portas.

Portuguese media are alarmed. The daily Publico wrote in an editorial that:

The president of the republic decided to overcome the political stalemate between the parties in the ruling coalition by adding another problem to the one that already existed. He decided to take power.

A former socialist minister, Pedro Silva Pereira, has warned that Cavaco Silva has put the government's future in doubt.

Here's Reuters take: Portugal political crisis deepens:

Portugal's political crisis deepened on Thursday after the president rejected a plan to heal a government rift and critics accused him of igniting a "time bomb" by calling for early elections next year.

And in the financial markets, Portuguese sovereign debt is weakening in value, pushing up the yield on its 10-year bonds to 6.993%, up from 6.89% last night).

12.00pm BST

Market update

At noon in the City, the big three European stock markets remain higher after an upbeat morning following Ben Bernanke suggested last night that the Federal Reserve could maintain its stimulus package for longer than thought (see opening post for the details).

This pushed the main index of European shares up to a five-week high.

• FTSE 100: up 40 points at 6545, +0.6%

• German DAX: up 72 points at 8138, +0.9%

• French CAC: up 18 points at 3859, + 0.5%

• Spanish IBEX: up 16 points at 8011, +0.2%

• Italian FTSE MIB: up 25 points at 15700, +.15%

The Bernanke effect is also being felt in the commodities market, with gold at a two week high (,285 per ounce).

Oil has hit a three-month high this morning, with a barrel of Brent crude trading at 8.92.

Matt Basi, head of UK sales trading at CMC Markets UK, explains that Bernanke has been a major impact on the stock markets:

After June’s sell off in risk assets was attributed to seemingly hawkish comments from the Fed Chairman last month, the July rally has built further momentum this morning on the back of a much softer statement from the Fed Chairman after markets closed last night.

This renewed dovishness has apparently been the result of concerns over the true state of the US labour market, though with half of the FOMC still arguing for tapering before the year end, the longevity of the asset purchase programme remains unclear.

(following last night's Fed minutes – details here)

11.19am BST

Italy gets debt sale away

In the bond markets, Italy has succeeded in selling almost €5bn of government debt despite being downgraded by Standard & Poor's on Tuesday night.

However, there appeared to be lacklustre demand – with the bid-to-cover ratios (the ratio of demand to the amount of debt on the table) showing the Italian Treasury accepted most of the offers.

Here's the key details:

• €3.38bn of three-year bonds sold: yield (or interest rate) of 2.33%, down from 2.38%. Bid-to-cover ratio of 1.34

• €1.461bn of 30-year bonds at an average yield of 5.19%, up from 4.985%. Bid-to-cover ratio of 1.3

There was chatter in the markets that the auction was quite slow – suggesting traders may be more nervous of Italian debt since the downgrade.

The news yesterday that Silvio Berlusconi's final appeal against a jail term and ban from public office will be heard on 30 July may also be a factor, with speculation that the veteran politician could pull support for Italy's coalition government if the hearing goes against him.

Updated at 11.48am BST

10.52am BST

Another key fact about the Greek labour market (see 10.16am) is that nearly two-thirds of unemployed people have been out of work for at least a year, economist Angelos Tsakanikas at the IOBE think tank explained.

And here's a graph showing how the ratio between those in work, and not, has been steadily falling over the last two years – from 1.15 to 0.8%.

Here's the ELSTAT statement on Greek unemployment in Greek and also in English

Updated at 10.53am BST

10.16am BST

Greek unemployment hits new record high

People enter a Greek Manpower Employment Organisation (OAED) office in a northern suburb of Athens July 11, 2013.
A Greek Manpower Employment Organisation (OAED) office in Athens today. Photograph: YORGOS KARAHALIS/REUTERS

The unemployment rate in Greece has climbed to a new record high of 26.9%, while the youth jobless rate is now a truly dire 57.5%.

Data just released by ELSTAT showed that there was no end to the Greek jobless crisis in Aprii. The official unemployment rate rose from 26.8% in March, and is significantly higher than the 23.1% recorded in April 2012.

Greek unemployment data, to April 2013

The data shows that there are now 3,636,042 people of working age employed in Greece, compared to 1,337,621 officially unemployed. A further 3,337,051 are classed as 'inactive' (ie, not in work or looking for a job).

Among women, the unemployment rate is now 30%, compared to 24.2% for men.

Updated at 10.41am BST

9.56am BST

Weidmann: ECB isn’t tied to the mast

The Sirens by Edouard Veith
The Sirens by Edouard Veith.

Jens Weidmann – the head of the Bundesbank and Germany's man on the ECB governing council – has railed against the current dovishness gripping the central bank world.

Weidmann is to tell an audience in Munich that the ECB has not "tied itself to the mast" with its new forward guidance on interest rates. Interesting timing, given the details in the ECB monthly report (see 9.40am).

Reuters has the story:

Weidmann, the hawkish chief of Germany's Bundesbank, said the ECB's commitment last week to keep its interest rates at record lows – or even cut them further – was justified by a subdued inflation outlook and a weak economic environment.

But he added that the ECB's monetary policy stance was conditional on economic developments."It is not an absolute advanced commitment of the interest rate path," he said in the text of a speech for delivery in Munich. "The ECB Council has not, like Odysseus simply tied itself to the mast."

We're all for classical references at Guardian Towers, but it seems like a slightly curious analogy. After all, if Odysseus hadn't been restrained he would have been lured to his doom by those alluring Sirens.

Presumably if Weidmann had the ship's wheel, they wouldn't have taken such a reckless course in the first place?

Updated at 10.10am BST

9.40am BST

ECB sheds light on forward guidance….

The European Central Bank has released its monthly bulletin, and it includes more details of the ECB's deliberations at last Thursday's governing council meeting.

The report (online here as a pdf) expands, a little, on its unprecedented move into forward guidance, by guiding that interest rates would remain at "present or lower levels for an extended period of time".

Today's report states:

The extended period of time over which the Governing Council currently expects the key ECB interest rates to remain at present or lower levels is a flexible horizon which does not pre-specify an end-date but is conditional on the Governing Council’s assessment of the economic fundamentals that determine underlying inflation.

So the ECB is unwilling to commit to a target or deadline, but still pinning its forward guidance to its primary mandate of price stability.

The report also shows that further rate cuts, from the current record lows, are certainly being considered. The ECB states that the guidance was released "before exhausting the scope for further reductions in the key ECB interest rates".

Frederik Ducrozet of Crédit Agricole spies a hint that the ECB won't, or can't, fix the credit squeeze in the eurozone periphery on its own.

Updated at 9.42am BST

9.10am BST

Juncker to quit over spying scandal

Luxembourg Prime Minister Jean-Claude Juncker at the start of a hearing at the Luxembourg Chamber of Deputies, in Luxembourg, 10 July 2013.
Luxembourg PM Jean-Claude Juncker at the start of a hearing at the Luxembourg Chamber of Deputies. Photograph: JULIEN WARNAND/EPA

Luxembourg, traditionally one of the more peaceful areas of the eurozone, is gripped by political crisis today after a spy scandal ended prime minister Jean-Claude Juncker's long reign.

Juncker, who played a key role in the eurozone crisis as head of the eurogroup of finance ministers, is expected to tender his resignation today after 18 years.

He has been brought down by revelations that Luxembourg's intelligence agency had been illicitely bugging politicians. Juncker is due to meet with his cabinet now, before meeting with the country's Grand Duke to propose 'snap elections'.

Luxembourg Prime Minister Jean-Claude Juncker (2-R) at the start of a hearing at the Luxembourg Chamber of Deputies, in Luxembourg, 10 July 2013.
Juncker at the start of a hearing at the Luxembourg Chamber of Deputies, in Luxembourg, 10 July 2013.

Juncker was brought down by his coalition partners, the Socialists group, which said he should take "full political responsibility" for the scandal. An official report found that the country's SREL security agency had illegally monitored top politicians, purchased cars for private use and made payments to local officials.

Juncker had argued that he had been focused on more important issues, saying:

The intelligence service was not my top priority. Moreover, I hope Luxembourg will never have a prime minister who sees SREL as [their] priority.

8.30am BST

In the currency markets…

The dollar has lost ground generally since Bernanke's comments and the release of the minutes from the Federal Reserve's last meeting*.

The pound is now up at .508, from as low as .486 at one point yesterday. That takes sterling back close to its levels before the Bank of England declared that UK interest rates will remain low for longer than the City expected.

And the euro's back above .30, a level it slid through last week after European Central Bank chief Mario Draghi said eurozone rates would remain at record lows for an 'extended period'.

* – Here's our story about the minutes: Fed members agree job market must improve before bond buys slow

Updated at 8.31am BST

8.15am BST

While Asia, the main Chinese stock market jumped 3% and the Hong Kong Hang Seng is up 2.4%.

All mainly on the news that the US economy isn't healthy enough to cope without 'highly accomodative' monetary policy….

8.12am BST

FTSE 100: the top risers

Mining stocks are the big gainers in London on the prospect of America's quantitative easing programme running for longer, along with Associated British Foods (owners of the Primark fashion chain) which released strong results this morning:

FTSE 100 early risers, July 11
Photograph: Thomson Reuters

8.07am BST

European shares join the rally

European shares have leapt ahead in the first couple of minutes of trading, as investors scramble to react to Ben Bernanke's comments last night (see 7.53am).

In London the FTSE 100 rose by 77 points to 6580, up 1.2%. The French, German, Italian and Spanish markets are showing similar gains.

Chris Weston of IG sums up the meat of the Bernanke speech thus:

Price action in every asset class came alive on Ben Bernanke’s narrative;

while his comments were clearly dovish, the key fact that he stipulated was that the Fed funds rate would not automatically rise when (and of course if) US joblessness hits 6.5%, and this has firmly dictated to the market that the 6.5% level is a threshold, not a trigger.

In other words, the punchbowl of easy money won't run dry soon….

7.53am BST

Bernanke: highly accommodative policy is what’s needed

Federal Reserve Chairman Ben Bernanke attends a meeting of the National Bureau of Economic Research in Cambridge, Massachusetts July 10, 2013. Bernanke, in a speech on the 100-year history of the U.S. central bank that made no direct reference to current monetary policy, said on Wednesday that policymakers have learned the hard way to treat financial stability as a top goal.
Federal Reserve Chairman Ben Bernanke attending yesterday’s meeting of the National Bureau of Economic Research in Cambridge, Massachusetts July 10, 2013.

Good morning, and welcome to our rolling coverage of the eurozone crisis, the global economy and the financial world.

It's going to be a lively day in the markets after Federal Reserve chair Ben Bernanke declared last night that the days of ultra-loose monetary policy are far from over.

Shares are rallying in Asia, and big gains are expected in Europe after a suprisingly dovish performance from Bernanke. The Fed chair implied that he and his colleagues are some way from ending the huge bond-buying programme that is pumping bn per month into the US economy.

The dollar tumbled after Bernanke suggested that the true rate of US joblessness was higher than shown by the official figures, and pointed out that inflation remained

As Bernanke put it:

Highly accommodative monetary policy for the foreseeable future is what's needed.

Bernanke said policy makers are "somewhat optimistic" about the US economy, but suggested that the Fed could take further action if needed:

If financial conditions were to tighten to the extent that they jeopardized the achievement of our inflation and employment objectives, then we would have to push back against that.

Bernanke's comments were surprising as two weeks ago, after the last Fed meeting, he has spoken of slowing the Fed's quantitative easing programme later this year, and ending it by the summer of 2014.

Minutes from that meeting, also released yesterday, showed that Fed officials were split over the issue, with some members wanting more reassurance that America's labour market was healing before turning down the tap of easy money.

And the prospect of yet more simulus measures has been greeted with a predictable cheer in the financial world — the Chinese market was up 4% in late trading).And the dollar has been tumbling against other currencies (round-up to follow)

Spread betters expect European shares to rally too:

But it's a less cheerful picture in the euro area today, where political instability is the theme of the day. Even in Luxembourg, where veteran prime minister Jean Claude Juncker is expected to formally resign today over a spying scandal.

I'll be tracking all the action in the markets and the euro area for the next few hours, as usual….

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