July 24 2013

Eurozone private sector returns to growth. Graph: why recession may be over. Stronger data from Germany and France… But not China. America’s manufacturing sector is picking up pace, with US factory sector PMI coming in at 53.2, up from June’s 51.9…


Powered by Guardian.co.ukThis article titled “Eurozone ‘pulling out of recession’; Greece one step from bailout cash – as it happened” was written by Graeme Wearden, for theguardian.com on Wednesday 24th July 2013 15.03 UTC

5.46pm BST

And that's a good moment to stop. I'll be back tomorrow, when the big event of the morning will probably be the first estimate of UK GDP for the second quarter of 2013.

Until then, thanks, and goodnight. GW

5.41pm BST

French jobless levels hits new record high

The number of people out of work in France has hit a new record high, dampening optimism generated by this morning's PMI data*.

France's jobless total rose by 14,900 in June to 3.279 million, a rise of 0.5%, the Labour Ministry reported. It means president Francois Hollande has yet to meet his pledge to get unemploment falling before the start of 2014.

Reuters has more details:

Though young people are the hardest hit by the jobs crisis, with 555,800 registered out of work in June, that number was down 0.3 percent from May, the labour ministry data showed.

The jobs crisis has become one of the biggest headaches for the Socialist government, which says it is convinced the jobless rate will fall over at least two months before the end of the year despite fresh records being hit every month.

While unemployment is a lagging indicator, Wednesday's data were still likely to dampen public spirits after Hollande and Finance Minister Pierre Moscovici have sought in recent days to drum up optimism over the economy, declaring the recession over.

* – see 8.08am onwards for details of how France's private sector is moving closer to growth this month.

5.25pm BST

Open Europe's sober take on today's PMI data is worth a read:

5.19pm BST

Europeahn markets close up

European stock markets have closed at their highest level in eight weeks, boosted by strong corporate results here and America as well as today's upbeat PMI surveys.

European market closing price
Photograph: Thomson Reuters

Michael Hewson of CMC Markets commented:

Europe’s markets caught an early bid today shrugging off a disappointing Chinese PMI number and taking the positives from better than expected European, French and German manufacturing and services PMI numbers for July, and a slew of better than expected company updates from companies like Kingfisher, ARM Holdings, Easyjet and Tate and Lyle.

And here's the biggest risers and fallers in London:

FTSE 100 top risers, July 24
Photograph: Thomson Reuters
FTSE 100 top fallers, Juy 24
Photograph: Thomson Reuters

4.45pm BST

On the issue of the Greek labour pool, Kathimerini reported this morning that the Athens government needs to find another 5,500 staff to fill it, and meet its targets…. More here.

4.43pm BST

Workers at Greek public hospitals, health centers, welfare structures and the ambulance service are taking part in a one-day strike today, leaving only a skeleton staff on duty.

Unions also held a protest outside the Health ministry today, over the government's plans to transfer some staff to the new 'mobility pool'.

That pool is a key part of the push to cut the state workforce — the one 'prior action' that needs to be met before Greece unlocks its aid payment (see 4.03pm).

Here's a couple of photos:

Workers at public hospitals, health centers, welfare structures and the ambulance service strike for 24 hours. -- Workers at public hospitals, health centres, welfare structures and the ambulance service strike for 24 hours on July 24, leaving only a skeleton staff on duty.
Photograph: Alexandros Michailidis/Demotix/Corbis
Workers at public hospitals, health centers, welfare structures and the ambulance service strike for 24 hours. -- Workers at public hospitals, health centres, welfare structures and the ambulance service strike for 24 hours on July 24, leaving only a skeleton staff on duty.
Photograph: Alexandros Michailidis/Demotix/Corbis

4.03pm BST

Greece one step away from next bailout payment

Back to the eurozone crisis, and the Eurogroup of finance ministers has announced that Greece is one step away from unlocking its next aid tranche, worth €2.5bn.

In a statement, Eurogroup chairman Jeroen Dijsselbloem announced that the Greek government has satisfied all-but-one condition. It wasn't more specific, but it must be the target for public sector job cuts:

Here's the full statement:

The euro area Member States have been informed today by the Troika institutions that Greece has satisfactorily implemented the prior actions required for the release of the next disbursement under the financial assistance programme, except for one action whose adoption by the Greek Parliament needs to be completed by Thursday, 25 July.

These prior actions included important steps in the areas of fiscal policy, tax reform, revenue administration, public administration reform, privatisation and financial sector restructuring. 

Subject to confirmation of compliance with the last outstanding prior action, national procedures may thereafter be finalised and are expected to be completed by 29 July. Once this process has been satisfactorily concluded, the EFSF will be authorised to release the first sub-tranche of the next instalment, amounting to EUR 2.5 billion, according to the programme

3.49pm BST

Sounds like UK readers should tune their televisions to ITV at 10pm tonight…

3.33pm BST

Jane Austen gets nod to grace £10

Breaking news in the UK: Jane Austen is to appear on the next £10 note.

The Bank of England governor, Mark Carney, has just announced that the author will grace the British tenner, from 2017.

Here's the full story:

Carney’s announcement was aimed at quelling a three-month storm of protest unleashed when King announced that the only woman to appear on an English banknote other than the Queen – the prison reformer Elizabeth Fry – would be replaced by Winston Churchill, probably in 2016.

She and Florence Nightingale are the only two women, other than the Queen, to have appeared on English banknotes since they started portraying historical figures in 1970.

And here's the new concept note, showing what it will look like:

Jane Austen £10
Jane Austen £10 Bank of England

I preferred our own version:

Updated at 3.58pm BST

3.26pm BST

Over in Germany, the entire former board of lender HSH Nordbank have gone on trial today in Hamburg.

Six executives are accused of misconduct, or "breach of fiduciary trust", in the run-up to the financial crisis, through allegedly risky and dubious deals. This includes the bank's chief executive, Dirk Jens Nonnenmacher and his predecessor Hans Berger.

Nonnenmacher and HSH's former capital markets chief, Jochen Friedrich, are also accused of accounting fraud,

More details here.

3.00pm BST

Speaking of America, this piece by Moira Herbst argues that income inequality and rising underemployment are holding back the world's largest economy:

10 reasons the US economy is stuck

2.38pm BST

US manufacturing activity hits four-month high

Flash estimate of US PMI, July 2013
Photograph: Markit

America's manufacturing sector is also picking up pace, although the labour market still remains weak.

Markit's 'flash' estimate of US factory sector PMI came in at 53.2, up from June's 51.9. That's the strongest rise in activity in four months.

New export orders, and new work generally, both rose, with total output across the sector posting its highest growth since March.

But while firms hired more workers, the rate of job creation is still lower than earlier this year.

Markit chief economist Chris Williamson explained that America's manufacturing sector isn't strong enough, yet, for the US Federal Reserve to start the process of slowing its stimulus package.

He said:

 The pace of manufacturing growth remains well below that seen at the start of the year, in part reflecting weaker demand from many export markets, notably China and other emerging economies.

Employment growth is disappointingly weak as a result, as firm focus on cost-cutting to boost competitiveness.

The Fed will therefore be encouraged by signs that the sector is showing signs of reviving, but will no doubt remain cautious with regard to the longer-term outlook for the economy and the job market. It is likely that policymakers will generally need to see growth strengthen further before sounding more confident about the ability of the economy to withstand any tapering of stimulus.

2.20pm BST

1.38pm BST

Marketwatch's Sara Sjölin is pretty upbeat about today's PMI data, writing:

 Basically, the region has started to grow, and instead of seeing the area mired in recession, there’s a decent chance it will emerge from the red numbers in the third quarter of the year.

“It’s probably fair to say we’ve turned a corner. We are expecting things to improve and the PMIs confirm that,” said James Ashley, senior European economist at RBC Capital Markets.

Updated at 1.38pm BST

1.24pm BST

Peugeot’s €7bn state loan ‘to get EU approval’

Another boost for France – EU regulators are poised to approve a state loan to Peugeot.

Reuters has the story:

European Union regulators will approve next week a €7bn French state aid loan guarantee for PSA Peugeot Citroen's financing arm aimed at ensuring the French carmaker's viability, a European Commission source said on Wednesday.

The Commission, which enforces state-aid rules in the 28-country European Union, opened an investigation into the case in May to decide whether the measure distorts competition.

A Commission source said the EU competition authority will clear the guarantee after examining concessions offered by Peugeot.

"The discussion was about the conditions that could allow the Commission to approve such a guarantee under EU state aid rules, that is, on the restructuring plan, not on the amount of the guarantee itself," the source said.

Facing falling sales and rising losses, Peugeot is trying to cut its domestic workforce by around one-sixth over the next two years, part of a €1.5bn restructuring plan.

1.13pm BST

Martin Van Vliet, an economist at ING, predicts a "slow and uneven" return to growth in the eurozone. Like Larry Elliott (12.54pm) and Howard Archer (10.01am) Van Vliet sees several obstacles:

"Fiscal policy will remain a drag on growth, especially in the periphery. High unemployment and still-weakening housing markets will also help keep domestic demand in many euro-zone countries subdued.

12.59pm BST

Greece's far-right Golden Dawn party is refusing to swallow the ban on its free food giveaway (see 11.42am), reports Kathimerini:

Far right Golden Dawn on Wednesday announced that it was moving a free food handout scheduled to take place on the same day to another location after police announced a ban on any kind of public gathering in central Athens, froon noon to midnight.

12.54pm BST

Larry Elliott: Eurozone’s problems aren’t over

Today's encouraging eurozone data (9.09am) should not distract from the need for more efforts to nurture growth in the region, writes economics editor Larry Elliott:

The good news is that Wednesday's report was no flash in the pan: the eurozone PMIs have been improving for the past five months. It is also encouraging that the pace of job shedding is easing, given that record unemployment has been a significant drag on activity.

That said, it's far too early to start celebrating. The PMIs have signalled many a false dawn in the past and even now are a long way from signalling that a period of solid growth has resumed.

What's more, the eurozone faces plenty of headwinds. Austerity programmes – despite being less severe – will continue to be a drag on growth; the latest figures for bank lending suggest that businesses are still struggling to get access to finance; and consumer spending will be held back by unemployment in excess of 12% and falling house prices.

More here: Is an end to Europe's misery in sight?

12.25pm BST

GSK warns of China hit

In the City, there's much excitement as drugs giant GlaxoSmithKline releases its financial results, as the storm over bribery allegations in China rolls on.

GSK has reported a 2% rise in revenues, including a 14% incease in sales in China, but warned investors that that its business there will suffer from the current investigation – which has seen several Chinese executives arrested in recent days.

My colleague Rupert Neate is live-blogging the GSK results and conference call here:

GSK's China crisis: chief executive Andrew Witty speaks – live

Witty has already described the allegations as "shameful" and "deeply disappointing".

11.42am BST

Golden Dawn banned from food handout

Sticking with Greece, the mayor of Athens has challenged the neo-Nazi Golden Dawn party by forbidding its members from distributing free food on Friday.

Athens mayor Giorgos Kaminis blocked Golden Dawn's plans for a distribution on Friday afternoon, saying the event "consciously promotes racism and xenophobia.”

The food giveaways are a key part of Golden Dawn's strategy to grow its popularity among Greeks struggling to feed themselves as its economic crisis continues. The party which campaigns to throw immigrants out of Greece, is currently in third place in political polls.

Athens police have now announced that any gatherings in Attiki Square are banned on Friday.

Back in May, Kaminis blocked Golden Dawn from giving away food in Syntagma Square, site of the Athens parliament.

Kathimerini reports that Golden Dawn isn't happy about the latest ban:

Golden Dawn insisted that its plans for a handout were “100 percent legal” as it had informed authorities and that it would go ahead with the event. The party said that all its MPs and leader, Nikos Michaloliakos, would be at the event.

The rise of Golden Dawn, with its swastika-esque logo, military-style training and extremist views, has caused alarm across Europe. The party's popularity has increased as Greece's economic crisis has worsened. Two weeks ago the Greek mnister for Public Order, Nikos Dendias, said he was "very worried" about the party.

Meanwhile, the editor of the Spectator has defended his magazine over an article published by its columist Taki, in which he defended Golden Dawn.

He argued:

GD became very popular with certain poor Greeks while it defended them from being mugged by Albanian criminals and drug dealers, and for safeguarding older folk after bank withdrawals. No, Golden Dawn is not house-trained, and many of its members tend to use rough language and get physical….

Golden Dawn members are mostly labourers, martial artists, cops, security personnel and good old-fashioned patriotic Greeks.

If you find that hard to believe (or stomach) here's the proof: Taki: A fascist takeover of Greece? We should be so lucky

And here's some reaction:

Updated at 12.24pm BST

10.46am BST

Protests in Greece

In Greece, medical staff are holding protests in the city of Thassaloniki against plans to cut health spending.

University lecturer Spyros Gkelis tweets a photo:

10.16am BST

PMI data and corporate results push markets up

European stock markets are also ralling on the back of today's encouraging PMI data.

Strong corporate results from firms such as EasyJet (details here) have also helped push the FTSE 100 up 44 points to 6641, a gain of 0.6%. Germany's DAX is up 0.5% while the French CAC has put on 0.7%).

From the City Matt Basi, head of UK sales trading at CMC Markets, explains:

After another record close for US equity markets last night equity indices have again opened on the front foot this morning, pushed on by better than expected PMI data from Europe and a string of strong earnings from blue chip firms.

EasyJet, ARM, Tate & Lyle, Kingfisher, GlaxoSmithKline and Compass have all provided updates this morning, and all occupy spots in the top 10 of the FTSE100 performance charts.

FTSE risers, 10am, July 24
FTSE risers, 10am, July 24 Photograph: /Thomson Reuters

10.01am BST

Economist: eurozone downturn is over

Howard Archer, European economist at IHS Global Insight, agrees that today's data shows that the eurozone has finally stopped contracting:

We suspect that Eurozone GDP was essentially flat in the second quarter amid improved German growth and reduced contraction in Italy and Spain.

The BBC's Gavin Hewitt is also encouraged, but points out that unemployment is still increasing (although at a lower rate).

9.55am BST

See the data yourself

9.52am BST

A quick reminder — today's improvement in the eurozone PMI data was driven by Germany's private sector growing at a five-month high (see 8.35am for details), and France's private firms shrinking at their softest pace in 17 months (see 8.08am onwards).

We'll have to wait until the end of July for full country-by-country details….

Updated at 9.54am BST

9.45am BST

Graph: Eurozone PMI

Here's a graph of recent PMI data versus eurozone economic output.

It explains why today's recovery in private sector output in the euro area means the recession may end this autumn:

Eurozone composite PMI, July
Photograph: Markit

As explained at 9.09am, Markit's composite PMI rose to an 18-month high of 50.4 – meaning growth for the first time since the early days of 2012.

The data showed a small contraction in the service sector, at 49.6 from 48.3. That was also an 18-month high.

Europe's factories are doing better in July, with the manufacturing PMI hitting a 24-month high of 50.1 from 48.8 in June.

OK, that's only a marginal expansion, as World First's Jeremy Cook points out:

But it's better than losing a fingernail….

Updated at 9.48am BST

9.25am BST

9.09am BST

Eurozone PMI suggests recession may soon end

It's official. The eurozone's private sector is healing, and the end of the recession that has haunted the euro area for more than a year may soon be over.

Markit's composite PMI output index, based on data from thousands of companies across the region, has hit its highest level in 18 months.

It rose to 50.4, up from 48.7 in June, driven by improved performances from private sector companies in France and Germany. This is the first time it's broken above the 50.0 no-change level since January 2012.

Markit reported that new orders only fell marginally, and job losses eased,

Chris Williamson, chief economist at Markit, said the data suggests the eurozone could start growing again soon:

The best PMI reading for one-and-a-half years provides encouraging evidence to suggest that the euro area could – at long last – pull out of its recession in the third quarter.

The revival is being led by a broad-based upturn in manufacturing, where growth surged to a two-year high. Increased goods production was reported in Germany, France and across the rest of the region as a whole.

There are also promising signs of stabilisation in the service sector, which hints at some much–needed upturns in domestic demand. Rising service sector activity in Germany is being accompanied by slower rates of decline in France and elsewhere across the region.

Employment continues to fall, but even on the jobs front there is welcome news in that companies are cutting back on headcounts to a lesser extent than earlier in the year.

The survey data will therefore provide a summer fillip to policymakers, especially in terms of there being light at the end of the tunnel for austerity-hit periphery countries where political and social tensions have risen.

The ECB in particular will be feeling much more confident in its expectation of the region returning to growth by the end of the year.

Details and reaction to follow

Updated at 9.25am BST

8.59am BST

The euro just hit a 1-month high of .3249 against the US dollar, following today's PMI data from Germany and France.

8.46am BST

8.45am BST

Early reaction

More reaction to this morning's upbeat data from France and Germany, and downbeat news from China:

8.40am BST

Graph: Germany’s PMI

German PMI, July 2013
Photograph: Markit

Tim Moore, senior economist at Markit, said Germany’s private sector had shaken off its recent malaise in July to post its fastest pace of
output expansion for five months (see 8.35am)

The return to new business growth sets a positive tone at the start of the third quarter and a rebound in employment numbers adds to the air of positivity in the latest figures.

The stronger performance of the German private sector in July appears to have been driven by improvements in domestic business and consumer spending.

In particular, manufacturers cited higher demand patterns from the autos industry and among clients in the domestic construction sector, which helped offset continued weakness in key export markets.

8.35am BST

German PMI beats forecasts

Germany's private sector has posted its strongest output in five months, suggesting Europe's largest economy may be strengthening this summer.

Markit just reported that the "Flash Germany PMI" rose to 52.8, from June's 50.4, The strongest reading since February this year.

Germany's factory sector returned to growth, clawing over the 50-point mark that separates expansion from contraction. Manufacturing PMI came in at 50.3, much better than June's 48.6.

And Germany's service sector PMI jumped to 52.5, from 50.4.

Encouraging stuff. Details to folllow….

8.19am BST

Graph: Does French PMI show recession ending?

French private sector PMI, to July 2013
Photograph: Markit

Today's improved French PMI data comes a day after finance minister, Pierre Moscovici, declared that the country's recession was over.

Jack Kennedy, senior economist at Markit, said there are signs that the French private sector is close to a recovery, and could return to growth this year:

Output in the French private sector moved closer to stabilisation at the start of the third quarter. Manufacturers actually signalled a rise in output for the first time in almost one-and-a-half years, while service providers registered a slower decline in activity.

8.08am BST

French PMI data

Encouraging data from France — where private sector output has fallen at its slowest rate in 17 months.

Markit, the data provider, reported that the French private sector PMI has risen to 48.8 this month, up from June's 47.4. That's a 17-month high, and suggests the private sector only shrank marginally.

France's manufacturing sector came close to posting growth, with a PMI of 49.8 (up from 48.4 in June). That's also a 17-month high. And the service sector also did better, at 48.2 from 47.2.

Markir reported signs of optimism in the eurozone's second-largest economy:

Service providers indicated a slower fall in outstanding business, while manufacturers reported a rise for the first time since April 2012.

The rate of job shedding in the French private sector moderated further in July. The latest fall in staffing levels was the slowest in 15 months. Both
service providers and manufacturers signalled weaker reductions in employment.

Here's the full report.

And here's some instant reaction from City experts on Twitter:

Updated at 8.11am BST

8.00am BST

Portuguese reshuffle

Portugal's new cabinet will be sworn in at 5pm BST today, at the end of a dramatic three weeks.

Junior coalition partner Paulo Portas becomes deputy prime minister, cementing his new, more powerful position after his (now-reversed resignation):

European reporter José Miguel Sardo has the details, and reports that the country's new economy minister is keen to make changes to Portugal's austerity programme.

7.49am BST

Chinese manufacturing activity hits 11-month low

Employees work inside a milk factory in Beijing, July 5, 2013.
A milk factory in Beijing, China, where manufacturing activity appears to be dropping. Photograph: CHINA STRINGER NETWORK/REUTERS

Good morning, and welcome to our rolling coverage of the latest events around the eurozone, the global economy and the financial markets.

A big morning for economic data has already begun with some disappointing news from China. Manufacturing activity in the world's second-largest economy has shrunk to its lowest level since last August.

New orders and output both shrank in July, while the jobs market also declined, according to the 'Flash' estimate released by HSBC in the early hours.

The flash HSBC/Markit Purchasing Managers' Index fell for a third straight month, to 47.7, from June's final reading of 48.2. A reading between 50 indicates that activity fell.

As Hongbin Qu, chief China economist of HSBC, explained:

The lower reading of the July HSBC Flash China Manufacturing PMI suggests a continuous slowdown in manufacturing sectors thanks to weaker new orders and faster destocking.

This adds more pressure on the labour market.

It also puts Chinese premier Li's promise yesterday to keep growth at 7% or higher under the microscope. Further stimulus measures could be needed, especially with Beijing banning anyone building a new government building until 2018.

But closer to home, how are Europe's manufacturing and service sectors performing this month?

We'll find out in the next few hours, with 'flash' readings from several countries including France (8am BST) and Germany (8.30am BST), followed by the full reading for the eurozone at 9am BST.

Also coming up…. Portugal's new government is being sworn in (details to follow), and medical staff in Greece will be holding a strike against proposed job cuts.

I'll also be watching for updates on the status of the next Greek aid payment, following last night's news that it may be delayed. if you missed that news, Marketwatch sums up the situation:

The European Commission notified Berlin Tuesday that it can’t vouch yet that Greece has fulfilled all the conditions to receive its next slice of bailout loans, Germany’s deputy finance minister said in a letter to the German parliament.

The decision means the next tranche of aid for Greece will likely be delayed, but there should not be any “serious” problem with the payment, one person familiar with the situation said.

Full story: Germany says payment of Greek aid may be delayed

I"ll be tracking all the latest developments through the day as usual…

Updated at 8.03am BST

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