Forex Research

Jan. 2, 2017 (Commerzbank AG) – Investors will have to keep a close eye on politics next year. We believe Donald Trump’s policies will stimulate economic growth and inflation only to a limited degree. That said, his election has triggered a long overdue reappraisal of the US economy.

As in the USA, anti-establishment movements are expected to continue gaining support in the euro zone which could result in political paralysis. The risk of a renewed sovereign debt crisis weighs on the economy, especially as the ECB’s monetary policy is close to its effective limit.

In China, the economy is suffering from the fact that the state will continue to keep highly indebted state-owned companies afloat. China is still battling a major exodus of capital. As we expected, the government has responded by reversing recent steps to deregulate capital movements. Since the beginning of this month, companies face the prospect of no longer being able to transfer dividend payments abroad.

These measures may help to apply the brakes in the short term, but in the longer term they will deter potential investors. In the medium term, further capital controls seem more likely than a return to the cautious deregulation of recent years.

Gold: better times ahead?

Recent pressure on the gold price is likely to become less significant over the course of next year. Indeed, ultra-loose global monetary policy, which results in low real interest rates, and great political uncertainty are likely to provide a tailwind for gold prices. We expect gold to rise to 1,300 USD per troy ounce by the end of 2017.

WIll the strong USD trend continue?

The markets are taking the Fed at face value when it suggests that rates are likely to rise more sharply. The market will therefore probably react asymmetrically: good data should help the U.S. dollar more than poor data will harm it.

 


USA 

Dec. 28, 2016 (Amplify Trading) – Amplify’s Head of Trading, Piers Curran, provides his 2017 insights. Below is a summary of what Piers thinks for some of the biggest issues facing the global financial markets in 2017.

We close out a extraordinary year for global markets. Several of the key economic risks materialised with the UK’s Brexit vote, Trump’s stunning election win, Renzi’s lost referendum and the Fed hike to cap it all off. Who would have dared predict that given these outcomes US equities would be surging to new all time highs as we march into Christmas. The notable takeaways from 2016 are Sterling weakness, markets pricing in Trump’s stimulus package with a steeper Fed rate hiking trajectory resulting in a sharp spike in bond yields, a surging US Dollar and rampant equity markets. One can’t help think of one word: complacency.

EUROPEAN POLITICS

Unfortunately, the probability of further terrorism in Western Europe is rising, which will impact Angela Merkel’s ability to win a record fourth term in the German election in H2 2017. I believe that, outside of Brexit, this now becomes the biggest European political risk. Italy: After their referendum it will likely be an unchanged scenario, no reform and no growth. France: Presidential elections in April/May 2017 will be a temporary distraction, ultimately I don’t think Le Pen can win as France has a two stage election process which makes it much more unlikely for a shock result to occur a la Brexit and Trump. But for sure European politics stays at the top of the global risks list for 2017.

BREXIT

Sorry to be bah humbug but I expect the first half of 2017 to show a notable change for the worse in market sentiment on this issue! As we approach the trigger date for article 50, I expect politicians on both sides of the Channel to posture for the forthcoming battle. This should trigger the next leg lower for Sterling (GBPUSD to sustain a break below 1.20 and head towards 1.10), which in turn will exacerbate a growing unease over rising inflation and, although FTSE100 stocks may stay supported due further currency weakness, I see the economic risks outweighing the cheap currency benefits to weigh on global equities.

CRUDE OIL

I believe the most significant factor is that Saudi Arabia’s strategy has now reversed for the first time in two years, whereby they are actively supportive of sustaining a move above $50 per barrel. This is tied into both their desire to diversify their economy, which involves a Saudi Aramco IPO in early 2018, and the fact that the market share they lost to US Shale producers has been returned to them via increased Asian demand. However, history tells us that OPEC implementation risk should never be ignored so whilst there is likely to be volatility in Q1, I believe the price of oil will spend most of 2017 between $50 and $60 per barrel.

TRUMP AND THE FED

US equities are finishing 2016 on all-time highs. Whilst I think that this can continue in the first few weeks of 2017, I believe that the 2017 high for the year will be printed in the first month of the year. Markets are irrationally pricing in a full and quick Trump fiscal stimulus package, and I expect the reality to be much more disappointing. Whilst Congress is Republican, they will want to remind Trump he doesn’t have free reign by  stalling and trimming his fiscal package. As a result, I expect to see equities give back some H2 2016 gains, the US dollar to do the same and for the Fed as a result to be more dovish than the three 2017 hikes projected.

ITALIAN BANKS

Italian Banks need at least €52 billion to clean up their balance sheet which is a much larger amount than the Italian Government’s proposed €20 billion rescue package outlined on the 19th December. I think it is inevitable that Banca Monte dei Paschi di Sienna gets fully bailed out and becomes stated owned in 2017. However, even though in the long run this continues the slow motion demise of the Eurozone’s third largest economy, in 2017 the ECB should have enough ammunition to delay the eruption of this longer term ticking time bomb. In the  meantime the Italian economy continues to flatline with an on-going inability drive through any much needed reform.

 

 

 

Nov. 25, 2016 (Commerzbank AG) – On December 4, Italy will technically ‘only’ be voting on reform of the Senate, which is merely a constitutional amendment.

However, the outcome of this referendum could result in serious difficulties for the euro zone in the medium term. If the proposed reform motion is rejected, there could be an early general election, resulting in a government led by the eurosceptic Five-Star movement.

Its spending policies would probably push up Italy’s sovereign debt even further, and there would then be a serious risk of a ‘buyers strike’ by investors; a sharp rise in yields on Italian government bonds and the euro zone sliding towards a second government debt crisis.

With the EUR nearing important long-term support at $1.0469, a negative outcome of the “Italian Roulette” game in early December could very well serve as a catalyst for further weakness of the single currency.

June 27, 2016 (Commerzbank AG) – The world seems different these days following the Brexit vote and after two days of a sell-off in the global markets. The GBP is at its lowest level in three decades and the safe haven currencies are back in demand. So, what’s next for the major central banks?

Fed

At her semi-annual testimony before Congress, Janet Yellen proved very cautious. While remaining optimistic mediumterm, she considers the latest weak jobs growth figure to be no more than a temporary loss of speed. However, the Fed – or at least Yellen – appears to be moving closer to viewing current low growth as a sign of “secular stagnation”. In that case, low productivity gains would be here to stay. Yellen considers the relatively low momentum of investment as a warning signal. In the first quarter, private non-residential investment was 0.5% below the previous year’s level. Therefore, she went on, the equilibrium interest rate was low by historical standards. This is behind the FOMC members’ predictions, which look for a policy rate below 1% by end- 2016 and below 2% by end-2017. Hence, only gradual rate hikes would be expected. Following the “zig” in May – when one FOMC member after another had signalled higher key interest rates – Fed communication has now returned to “zag”.

ECB

ECB president Draghi urged euro zone policy makers to support the economic recovery by implementing economic reforms. Draghi’s comments underscore the central bank’s recent message that it has probably done enough for the time being and will now wait to see how its recent policy measures unfold. While Draghi stressed that time is needed for the full pass through of the bank’s measures, at the same time he added that the ECB would act if it saw an unwarranted tightening of financial conditions. ECB Executive Board member Mersch said that he would be the last person to claim that interest rates can be reduced ever further into negative territory. He explained that the ECB wants to prevent “collateral damage for financial market players” and “panic saving”, i.e. people start to save more because they think the period of low rates will last a long time. Draghi emphasised that the judgement of the German Constitutional Court confirmed that the OMT programme is compatible with EU law and falls within the ECB’s mandate. Yves Mersch stressed that the ECB has introduced an issuer limit for the bank’s QE programme as the European Court of Justice “explicitly highlighted” that such limits are needed for the purchases to be compatible with law.

BoE (Bank of England)

With the UK electorate surprisingly voting to leave the EU, and thus wrong-footing the markets, UK asset prices have come under significant selling pressure. The GBP-USD exchange rate at one stage registered a 13% peak-to-trough decline in the space of less than eight hours. Following the plans set out ahead of the referendum and today’s statement (“take all necessary steps”), the BoE will stand ready to inject substantial amounts of liquidity into the market, which will act as the first line of defence prior to any possible rate cut. We do not anticipate at this stage that the collapse in sterling will be uppermost in the BoE’s mind – it makes little sense to stand in the way of a falling knife particularly in view of the fact that this is the most savage move on daily data back to 1971. Far more likely is that the BoE will intervene judiciously only when the time is right (i.e. when it believes it has a chance of achieving the desired effect) in order to nudge the exchange rate. With FX reserves at all-time highs, it has the means to act if desired but there will be no desire to squander them unnecessarily. With regard to rate cuts, the BoE does have this option but having failed to jack them up in 2014 when it had the chance, it is constrained in its choice of actions with Bank Rate effectively at the lower bound.

BoJ (Bank of Japan)

Since the announcement of its extremely expansionary monetary policy (“quantitative and qualitative easing”, QQE) in April 2013, the Bank of Japan has bought government bonds equivalent to around 50% of GDP. It holds roughly 36% of all outstanding Japanese government bonds (JGB) at present and – with the speed of purchases unchanged – is likely to hold around half of all JGBs by the end of 2017. Even the IMF has warned that the BoJ will have to reduce its asset purchases by the end of 2018 to ensure that the government bond market continues to work properly. Even with this aggressive approach, the BoJ has been unable to reach its fundamental goals so far. The plan to drive inflation to 2% by the end of fiscal 2017 (March next year), in particular, appears increasingly illusory. In April, the corresponding measure of inflation – i.e. excluding fresh foods – stood at -0.3%. This is partly due to the significant yen appreciation in recent months which continues to prevent any major inflation pressure from unfolding. The BoJ’s scope for counter-measures appears limited. QE is proving difficult to expand (this also applies to the ETF purchases). Hence, the only “alibi measure” left appears to be a minimal rate cut. The next BoJ meeting will take place in late July.

 

 

 

 

 

May 5, 2016 (Tempus, Inc.) – The Japanese Yen strengthened further as a result of pessimism across global markets. The safe-haven currency is now 13.0% stronger in 2016. This is worrying Minister of Finance Taro Aso, who spoke over the weekend about the need to consider intervention in the FX market.

He said it was “extremely concerning” that last week JPY experienced a five-yen move in a matter of only two days last week. Aso added that this was “clearly a one-sided speculative move” and that under the G-20 agreement a response to this kind of wild swing would be appropriate.

Meanwhile, Bank of Japan Governor Haruhiko Kuroda said monetary policy is currently focused on price stability and not on the exchange rate. The U.S. complained last week that Japan and China are not doing enough to monitor FX and accused them of unfair practices.

If the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission…

Powered by Guardian.co.ukThis article titled “Democratic decisions on benefits of the EU” was written by Letters, for The Guardian on Tuesday 15th December 2015 19.32 UTC

Zoe Williams misses the point about Cameron’s negotiations with EU member states (There is no master plan. On the EU, Cameron is flailing, 14 December). Restricting benefits to EU migrants may or may not be a sensible, legal or logical way to meet the concerns of people, be they “Ukip-minded” or not. But once our PM had to ask permission to do so, the issue was completely transformed. It is no longer one of EU migrants’ access to benefits, but the far more fundamental question of who decides how British taxpayers’ money is spent. It became a question of national sovereignty. That’s why organisations such Trade Unionists Against the EU are not awaiting the outcome of “negotiations” and are campaigning to get the UK out. The issue is as simple as it is clear: if the British people take a democratic decision to do something – in this case change the benefit system – they should be able to do so without having the prime minister scuttering around Europe asking permission. This will continue to be the case while the UK remains a member of the EU.
Fawzi Ibrahim
Trade Unionists Against the EU

• David Cameron’s negotiations on limiting in-work benefits for EU immigrants appear to have won little support. One simple approach might be to limit levels of benefit to those payable in the country of origin of the European migrant. That would deter those seeking to exploit the system and could disarm politicians in other member states, who would no longer be able to claim that their emigrants were being monetarily disadvantaged. It would leave the fundamental right of freedom of movement untouched.
Ken Daly
Aisholt, Somerset

• Hans Dieter Potsch, the chairman of Volkswagen, glosses over the truth of what his company did to cheat emission tests: it wasn’t a “chain of errors”, it was a chain of liars prepared to sanction a management mindset (VW admits to ‘chain of errors’ at company, 11 December). Or is he not admitting responsibility, even though he is no doubt paid a monstrous salary on the basis of being in charge? This incident just confirms that all companies need active oversight from outside to try and stop such appalling actions. They cannot be trusted any more than managers of banks and other financial groups. This is why we need the EU and strong legislation trying to stop such abuses in companies that think they can do what they like.
David Reed
London

• Join the debate – email guardian.letters@theguardian.com

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Eurozone ministers are expected to refuse to hand over €2bn in new loans to Greece today, as a row over bad loans deepens. Officials: Eurogroup won’t release €2bn to Greece. France: We want a deal with Greece. OECD warns on global trade slowdown…

Powered by Guardian.co.ukThis article titled “Greece battles with creditors over new bailout payment – business live” was written by Graeme Wearden, for theguardian.com on Monday 9th November 2015 13.57 UTC

Wolfgang Schauble also flagged up that Greece has not yet implemented its new privatisation fund.

This was a key part of July’s bailout deal, under which €50bn of Greek assets will be sold off to cover the cost of recapitalising its banking sector.

Wolfgang Schauble

Germany’s Wolfgang Schäuble has arrived at the meeting.

He sounds fairly relaxed as he speaks to reporters.

Schäuble says that Greece has not yet taken all the required steps to qualify for its next aid tranche (according to his knowledge anyway).

Here’s the key quote from Eurogroup chief Dijsselbloem, confirming that Greece won’t get its €2bn today:

“The 2 billion will only be paid out once the institutions give the green light and say that all agreed actions have been carried out and have been implemented. That still has not happened.”

Some reaction to Jeroen Dijsselbloem’s comments as he arrived at the eurogroup meeting:

Dijsselbloem: Greece must complete first milestones very soon

Eurogroup president Jeroen Dijsselbloem
Eurogroup president Jeroen Dijsselbloem Photograph: EbS

An official limo has just deposited Eurogroup president Jeroen Dijsselbloem at today’s meeting.

He gave a brief ‘doorstep’ to reporters — it sounds like he’s not expecting to sign off Greece’s next aid tranche today.

Dijsselbloem says progress has been made in recent weeks regarding Greece’s banks and reform programmes.

But there are still open issues, and a lot more work needs to be done in the next two weeks.

The first set of milestones must be completed soon, he adds (which would pave the way to disbursing that €2bn in new loans).

And Dijsselbloem says he can’t speculate about the political crisis in Portugal where left-wing parties could soon win power.

My understanding is there will be debate today and tomorrow, says Dijsselbloem. There is always a legitimate government in each country, and that’s the government we work with….

Updated

Moscovici: Still a little way to go on Greece

Pierre Moscovici

Ministers are starting to arrive at today’s Eurogroup meeting in Brussels.

Commissioner Pierre Moscovici has told reporters gathered outside that he hopes Greece will receive its €2bn aid tranche this week, if not today.

Moscovici says he had “very positive, very fruitful meetings” in Athens last week with prime minister Alexis Tsipras and finance minister Euclid Tsakalotos.

The moves are positive. Most of the milestones are already adopted or decided. There is still a way to go.

We are not yet completely there, but I am hopeful and confident that with the spirit of compromise, with good co-operation with the authorities we can make it… if not today then in the days to come.

We are not far from that, but obviously there is a little way to go.

Moscovici then vanished inside, where he (or his team) tweeted this optimistic message too:

Shares are falling sharply on the Lisbon stock market, as investors react to the latest political upheaval in Portugal.

The main stock index, the PSI 20, has shed more than 2%, as the country’s socialist parties prepare to oust the centre-right administration sworn in two weeks ago.

Portuguese sovereign bonds are also continuing to fall, showing greater anxiety over the prospect of an anti-austerity government taking over.

The 10-year Portuguese bond is now yielding nearly 2.9%, a jump of 23 basis points. That’s a four-month high.

Over the weekend, four left-wing parties put aside their differences to support a legislative programme. They collectively hold a majority of seats in the parliament, following October’s election.

Analysts at the Royal Bank of Scotland Group have already warned that the Socialist-led program “is clearly less market-friendly than the one of the incumbent government,” Bloomberg flags up.

More here:

Updated

Greece “plans return to capital markets” in 2016

Now here’s a thing. Greece is apparently hoping to return to the financial markets next year.

Government insiders have told the Financial Times that plans are afoot to sell debt in the capital markets in 2016.

Despite the wild drama this year (capital controls, failing to repay the IMF, nearly leaving the eurozone), Athens hopes that investors will put their faith in them.

The FT says:

It won’t be in the first quarter but summer has been talked about,” said a person familiar with the situation.

“It depends on a positive chain reaction of events but discussions have been held.”

Full story: Greece plans a return to capital markets

Experienced City investors may raise their eyebrows….

On the other hand, Greece hasn’t actually defaulted on the three-year debt it issued last summer:

Updated

European Commissioner president Jean-Claude Juncker has just welcomed eurogroup president Jeroen Dijsselbloem to his office, for talks ahead of this afternoon’s meeting of finance chiefs.

Dijsselbloem got the tradition greeting:

Analyst: Greek crisis is repeating

Peter Rosenstreich, head of market strategy at Swissquote Bank, says investors need to pay attention to Greece again:

Rosenstreich is worried that Athens and its eurozone neighbours couldn’t reach agreement on how to handle the repossession of houses from people who are in default on their mortgages.

It suggests the whole third bailout deal, agreed after so much angst in July, may be in early trouble.

Rosenstreich says:

Left-wing Syriza is concerned that the high threshold will expose too many Greece citizens to the loss of their primary properties. In addition, Athens is balking at a 23% take rate on private schools.

This feels like a repeat of 8-months ago. The whole world understood that the third bailout agreement made was unsustainable. It was only a matter of time before it unraveled.

Getting back to Greece…

AFP’s man in Brussels, Danny Kemp, has heard that the outstanding issues between Greece ands its creditors *might* be resolved in a few days.

The OECD has also cut its forecast for global growth this year to 2.9%, down from 3%, due to the sharp slide in trade.

It also predicts growth of 3.3% in 2016, down from 3.6% previously.

The two demonstrators who disrupted David Cameron’s speech have revealed they created a fictitious company to get into the CBI’s flagship event:

Perhaps the CBI should get some advice from the European Central Bank, which upgraded its own security systems after a protester jumped on Mario Draghi’s desk this year…

The OECD’s latest economic outlook is online here.

OECD sounds alarm over global trade

The OECD has just released its latest economic projections.

And the Paris-based thinktank has warned that global growth is threatened by the impact of China’s slowdown on world trade, but raised its forecast for US growth.

It also urged richer countries to step up investment while keeping monetary policy loose, as my colleague Katie Allen explains.

The thinktank’s twice-yearly outlook highlights risks from emerging markets and weak trade.

Presenting the Outlook in Paris, OECD Secretary-General Angel Gurría said:

“The slowdown in global trade and the continuing weakness in investment are deeply concerning. Robust trade and investment and stronger global growth should go hand in hand.”

The thinktank edged up its forecast for economic growth in the group of 34 OECD countries this year to 2.0% from 1.9% in June’s outlook, when it had noted a sharp dip in US growth at the opening of 2015. For 2016, it has cut the forecast for OECD countries’ growth to 2.2% from 2.5%.

The OECD left its forecasts for the UK little changed with growth of 2.4% this year and next, compared with a forecast for 2016 growth of 2.3% made in June. The US economy, the world’s biggest, is now seen growing 2.4% this year and 2.5% in 2016, compared with June’s forecasts of 2.0% and 2.8%.

On the UK, the OECD said economic growth was projected to “continue at a robust pace over the coming two years, driven by domestic demand.”

Updated

Greece’s economy minister, George Stathakis, has suggested that eurozone governments might have to take a ‘political decision’ on whether Greece should get its €2bn aid tranche.

Stathakis told Real FM radio that talks with officials over how to enforce foreclosure laws have run their course:

The thorny issue is the distance that separates us on the issue of protecting primary residences.

“I think the negotiations we conducted with the institutions has closed its cycle .. so it’s a political decision which must be taken.

Updated

WSJ: Eurozone won’t release Greek loan today

Two eurozone officials have told the Wall Street Journal that there’s no chance that Greece will get its €2bn bailout loan at today’s eurogroup meeting.

That won’t please Michel Sapin, given his optimistic comments earlier. But it appears that Greece simply hasn’t done enough to satisfy lenders….

…in particular, over how to treat householders who can’t repay their mortgages. Athens and its creditors are still divided over which householders should be protected from foreclosure.

The WSJ’s Gabriele Steinhauser and Viktoria Dendrinou explains:

Senior officials from the currency union’s finance ministries were updated on Greece’s implementation of around 50 promised overhauls, known as milestones, during a conference call Sunday afternoon. While progress has been made on some issues—including measures to substitute a tax on private education, the governance of the country’s bailed-out banks and the treatment of overdue loans—Athens and its creditors will need more time to sign off on all overhauls, the officials said.

Greece needs the fresh loans to pay salaries and bills and settle domestic arrears. However, the government faces no immediate major payments to its international creditors, reducing the sense of urgency.

There will be “no agreement on [the] €2 billion,” one official said.

Updated

Drama at the CBI conference!

David Cameron’s speech has been briefly disrupted by protesters, chanting that the CBI is the “voice of Brussels”.

They’re clearly unhappy that Britain’s top business group is firmly in favour of EU membership:

Cameron handles it pretty well – suggesting they ask him a question rather than looking foolish.

Updated

Another important meeting is taking place in Brussels today.

UK business secretary Sajid Javid will discuss the crisis in Britain’s steel works with EU economy and industry ministers this afternoon.

Steel unions have urged Javid to demand a clampdown on cheap steel imports from China, which they blame for triggering thousands of job cuts across the UK steel industry:

Cameron at the CBI

David Cameron at the CBI
David Cameron at the CBI Photograph: Sky News

David Cameron is telling the CBI that he’s met business concerns, by cutting red tape and corporate taxes.

On infrastructure, he says the government has made progress – citing the planned HS2 railway – but admits there’s more to do.

We want to the most business friendly, enterprise friendly, government in the world, he adds. But the PM also acknowledges that Britain must do better on exports.

And he’s now outlining a new plan to give everyone guaranteed access to broadband, by 2020.

My colleague Andrew Sparrow is covering all the key points in his politics liveblog:

Heads-up: prime minister David Cameron is addressing the CBI’s annual conference in London. There’s a live feed here.

He’s expected to warn that he could consider campaigning to leave the EU, if his attempts to reform Britain’s relationship with Brussels is met with a ‘deaf ear’.

Updated

The prospect of yet another tussle over Greece’s bailout programme is casting a pall over Europe’s stock markets this morning.

The main indices are mainly in the red, as investors prepare to hear the dreaded phrase ‘eurogroup deadlock’ again.

European stock markets, early trading, November 09 2015
European stock markets this morning Photograph: Thomson Reuters

Conner Campbell of SpreadEx says that Greece’s “sluggish progress” over implementing foreclosure rules is an unwelcome reminder of the eurozone’s lingering issues.

The country’s next €2 billion tranche, which should be signed off at today’s Eurogroup meeting, is currently being withheld by Greece’s creditors, who are dissatisfied with the way the region’s hot potato has (or hasn’t) implemented the required reforms.

It’ Déjà vu all over again, as China’s stock market is pushed up by stimulus hopes, and Greece’s bailout hits a snag.

Open Europe analyst Raoul Ruparel points out that today’s dispute is small potatoes, compared to the big challenge of cutting Greece’s debt pile.

Greece is also clashing with its creditors over plans to hike the tax rate for private education, as the Telegraph’s Mehreen Khan explains:

That’s a slightly unusual issue for a hard-left party to go to the barricades over, when it needs agreement with its lenders to unlock the big prize of debt relief.

Updated

France: We want a Greek deal today

French Finance minister Michel Sapin.
Michel Sapin. Photograph: Lionel Bonaventure/AFP/Getty Images

France is playing its traditional role as Greece’s ally, ahead of today’s meeting of eurozone finance chiefs.

French finance minister Michel Sapin has told reporters in Paris that he hopes an agreement can be reached today over the main outstanding hurdle — how to handle bad loans at Greek banks (as explained earlier).

Sapin offered Athens his support, saying:

Greece is making considerable efforts. They are scrupulously respecting the July agreement.

One thorny issue remains: the seizure of homes for households who can’t pay their debts. I want an agreement to be reached today. France wants an agreement today.

(thanks to Reuters for the quotes)

Updated

Greek journalist Nick Malkoutzis of Kathimerini tweets that the gloss is coming off Alexis Tsipras’s new administration:

Portuguese bond yields jump as leftists prepare for power

The prospect of a new anti-austerity government taking power in Portugal is hitting its government debt this morning.

The yield (or interest rate) on 10-year Portuguese bonds has risen from 2.67% to 2.77%, a ten-week high.

That’s not a major move, but a sign that investors are anxious about events in Lisbon.

Portuguese 10-year bond yields

Updated

This new dispute over Greece’s bailout comes three days before unions hold a general strike that could bring Athens to a standstill.

The main public and private sector unions have both called 24-hour walkouts for Thursday, to protest against the pension cuts and tax rises contained in its third bailout deal.

ADEDY, the civil servants union, accused the government of taking over “the role of redistributing poverty”.

Just six week after winning re-election, Alexis Tsipras is facing quite a wave of discontent….

Dow Jones: Ministers won’t release Greek aid today

The Dow Jones newswire is reporting that eurozone finance ministers definitely won’t agree to release Greece’s next aid tranche at today’s meeting, due to the lack of progress over its bailout measures:

Updated

Updated

Greek officials have already warned that the argument over legislation covering bad loans won’t be resolved easily.

One told Reuters that:

There is a distance with lenders on that [foreclosure] issue, and I don’t think that we will have an agreement soon.

Prime minister Alexis Tsipras discussed the issue with Commission chief Jean-Claude Juncker yesterday.

The official added that those talks were a step towards resolving the issue at “a political level”; Greek-speak for a compromise hammered out between leaders, rather than lowly negotiators.

Updated

Greek debt talks hit by foreclosure row

University students holding flares burn a European flag outside the Greek parliament during a protest in central Athens last Thursday.
University students holding flares burn a European flag outside the Greek parliament during a protest in central Athens last Thursday. Photograph: Petros Giannakouris/AP

After a couple of quiet months, Greece’s debt crisis has loomed back into the spotlight today.

A new dispute between Athens and her creditors is holding up the disbursement of Greece’s next aid tranche, worth €2bn.

Athens spent last weekend in a fevered attempt to persuade its creditors that it has met the terms agreed last summer, to qualify for the much-needed cash.

But it appears that lenders aren’t convinced, meaning that the payment won’t be signed off when eurogroup ministers meet in Brussels at 2pm today for a Eurogroup meeting.

The two sides are still arguing over new laws to repossess houses from people who are deep in arrears on their mortgage payments.

Athens is trying to dilute the terms agreed in July’s bailout deal, but eurozone creditors are sticking to their guns. They insist that Greek residences valued above €120,000 should be covered by the foreclosure laws, down from the current level of €200,000.

The Kathimerini newspaper explains:

The key stumbling block is primary residence foreclosures.

Greece has put forward stricter criteria that protects 60 percent of homeowners, while suggesting that this is then gradually reduced over the next years.

With a deal unlikely today, officials are now racing to get an agreement within 48 hours or so:

Greece told to break bailout deadlock by Wednesday

And Greece certainly needs the money, to settle overdue payments owed to hundreds of government suppliers who have been squeezed badly this year.

Updated

The Agenda: Markets see Fed hike looming

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

Across the globe, investors are finally facing the prospect that the long run of record low interest rates is ending, at least in America.

There’s now a 70% chance that the US Federal Reserve hikes borrowing costs in next month’s meeting, according to this morning’s data.

This follows Friday’s strong US jobs report, which show 271,000 new positions created last month. With earnings rising too, Fed doves will probably be tempted to finally press the rate hike button at December’s meeting.

That is pushing up the dollar this morning, and weakening the euro. That will please the European Central Bank, as it ponders whether to launch its own new stimulus measures.

European stock markets are expected to inch higher at the open:

Also coming up….

  • The OECD will issue new economic forecasts at 10.30am GMT.
  • Britain’s business leaders are gathering in London for the CBI’s latest conference. The event is dominated by the UK’s “Brexit” referendum, and claims that the CBI is too pro-EU.
  • Eurozone finance ministers are holding a eurogroup meeting in Brussels this afternoon.

And there is fresh drama in the eurozone.

In Portugal, three left-wing parties have agreed to work together in a new “anti-austerity government”.

That will bring down minority administration created by Pedro Passos Coelho two weeks ago, after October’s inconclusive election.

And with Greece struggling to implement its own austerity measures, Europe’s problems are pushing up the agenda again.

We’ll be covering all the main events through the day….

Updated

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Kristin Forbes, a member of the Bank of England Monetary Policy Committee, signals she may vote for an interest rate hike on the back of recovering UK economy by downplaying potential fallout for UK from emerging markets slowdown…

 

Powered by Guardian.co.ukThis article titled “Bank of England policymaker says rate rise will come sooner, not later” was written by Katie Allen, for theguardian.com on Friday 16th October 2015 13.06 UTC

An interest rate hike in the UK will come “sooner rather than later” and pessimism about the state of the global economy is overdone, according to a Bank of England policymaker.

Kristin Forbes, a member of the bank’s rate-setting monetary policy committee (MPC), was also upbeat about the domestic economy. She argued that the country had only limited exposure to emerging markets such as Russia and Brazil and that, despite signs of a slowdown in those markets, British businesses should not be deterred from building stronger links with them.

Forbes’s intervention, against the backdrop of a recovering UK economy, indicated that she is preparing to vote for rates to be raised from their current record low of 0.5%.

“Despite the doom and gloom sentiment, the news on the international economy has not caused me to adjust my prior expectations that the next move in UK interest rates will be up and that it will occur sooner rather than later,” she said in a speech on Friday.

Forbes conceded that if some of the potential risks to emerging markets play out – such as a sharper than expected slowdown – “then the UK economy is unlikely to be immune”. But she said the UK’s exposure “appears manageable”.

Her comments align her with fellow rate-setter Ian McCafferty, who has voted for higher rates at recent policy meetings, where the MPC has split 8-1 at recent gatherings in favour of holding rates steady. But the Bank’s chief economist, Andy Haldane, said last month that rates may have to be cut further given signs of a slowdown in the UK and risks to the global economy from China.

The newest member of the nine-person MPC, Jan Vlieghe, also left the door open to an interest rate cut this week when questioned by MPs. Highlighting low inflation, Vlieghe told parliament’s Treasury committee that there was an option to cut rates but that the next move was “more likely to be up than down”.

Forbes, a US economics professor, said that on emerging markets, “recent negative headlines merit a closer look”.

“After considering the actual data and differences across countries, the actual news for this group is much more balanced (albeit not all bright),” she said in her speech, entitled “growing your business in the global economy: Not all doom and gloom”.

She was speaking a week after the International Monetary Fund warned central bankers that the world economy risks another crash unless they continue to support growth with low interest rates.

Forbes referred to the IMF’s latest downgrade to global growth prospects but noted that the fund had left its China forecasts unchanged. The data from China “has not yet weakened by anything close to what the gloomy headlines imply”, she added.

More broadly, she felt the global outlook was also better than headlines suggested.

“Although the risks and uncertainties in the global economy have increased, the widespread pessimism is overstated,” Forbes said.

She told business leaders that they should not be deterred from trading with emerging markets by the recent negative news, which “should prove temporary”.

“UK companies – as a whole – have been slow to expand into emerging markets. This may provide some stability over the next few months if the heightened risks in some of these countries become reality. But when viewed over a longer perspective, this limited exposure to emerging markets has caused the UK to miss out on growth opportunities in the past,” Forbes said.

UK interest rates were slashed to shore up the economy during the global financial crisis and they have stayed at a record low for more than six years. With inflation below zero and headwinds from overseas, economists do not expect a rate hike until well into next year.

In the US, interest rates are also at a record low of near-zero. Policymakers had been signalling they could start hiking last month but then worries about China’s downturn prompted them to wait. Still, the Federal Reserve chair, Janet Yellen, recently said the current global weakness will not be “significant” enough to alter the central bank’s plans to raise rates by December.

Forbes was also optimistic that the UK could weather the turmoil and said its domestic-led expansion “shows all signs of continuing, even if at a more moderate pace than in the earlier stages of the recovery.””

Howard Archer, an economist at the consultancy IHS Global Insight, said Forbes’ remarks reinforced the picture of a wide range of views on the rate-setting committee.

“The current wide range of differing views within the MPC highlights just how uncertain the outlook for UK interest rates is – although it still seems to be very much a question of when will the Bank of England start to raise interest rates rather than will they,” he said.

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Seven years following the banking crisis, senior bankers are still moaning about over-regulation, but with the government still owning major stakes in banks this is no time to water down the rules. This is not a normal state for the banking industry…

 

Powered by Guardian.co.ukThis article titled “The banking crash seven years on: it’s not yet business as usual” was written by Jill Treanor, for theguardian.com on Monday 12th October 2015 11.25 UTC

Seven years ago this week, Gordon Brown – the then prime minister – was in full combat mode. Royal Bank of Scotland (RBS) and HBOS were on the brink of collapse and risked bringing down the rest of the financial system with them. Brown was left with little option but to step in with billions of pounds of taxpayers’ money to act as a “rock of stability” to prevent the financial sector collapsing.

The intervening years have led to soul-searching through inquiries and changes in the rules about the amount – and type – of capital banks must hold to protect against collapse. Rules about the way bonuses are paid to top bankers have changed: deferral and payment in shares are now the norm for the most senior bankers. Changes are also being made to the way banks are structured following the recommendations by the Independent Commission on Banking, chaired by Sir John Vickers.

The government still owns 73% of RBS, down from 79%, and is yet to get rid of all its shares in Lloyds Banking Group, formed when HBOS was rescued by Lloyds TSB during the crisis. This is not a normal state for the UK banking industry.

Yet senior bankers are moaning about the difficulties their businesses face because of regulation. John McFarlane, the chair of Barclays, is again talking about national champions in investment banking. He raised it in July and again this week by suggesting that a merger of European investment banks (£) might allow a regional champion to be created to compete with US rivals.

Such remarks may help explain why, just a few weeks ago, Paul Fisher, a senior Bank of England official, issued a warning against watering down the post-crisis rules. “We probably won’t know for sure just how effective the new regime is until we reach another crisis. Meanwhile, we need to guard against the reforms being rolled back as a result of a period without crisis,” Fisher told an audience in London.

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Powered by Guardian.co.ukThis article titled “Growth fears as UK and eurozone service sectors slow – live updates” was written by Graeme Wearden (until 2pm BST) and Nick Fletcher (now), for theguardian.com on Monday 5th October 2015 14.21 UTC

Meanwhile here’s the arrivals at the Eurogroup meeting to discuss the latest Greek bailout programme:

And here’s an extract from the roundtable discussion:

Dennis de Jong, managing director at broker UFX.com said:

With inconclusive economic data in recent weeks, the Fed is now split on the timing of an interest rate rise. That situation is unlikely to change in response to today’s non-manufacturing figures, which aren’t strong enough to sway Janet Yellen and Co towards a clear decision.

A decline on last month puts a dampener on what is actually quite a robust set of numbers. It’s not all doom and gloom, however, as Yellen’s reluctance to act may be seen as a positive move elsewhere.

Wall Street, which has been quiet as it awaits consistency among the financial uncertainty, may now be prompted into increased activity before the end of 2016.

Confirmation that the US services sector saw slowing growth in September comes from the Institute for Supply Management.

The ISM services index fell to 56.9 from 59 in August, and lower than analysts’ expectations of a reading of 57.5p. Both new orders and business activity slowed.

But the employment component showed an increase:

Updated

And shortly we will get the ISM indices…

US service sector growth slows

America’s service sector is growing by less than expected, according to the first of two rival surveys.

Markit’s final purchasing managers index for the sector came in at 55.1 for September, down from an early reading of 55.6, which was also what analysts had been expecting for the final figure. That compares to 56.1 in August.

Markit service sector PMI
Market service sector PMI Photograph: Markit/Markit

Markit’s final composite reading is 55 compared to 55.7 in August. Chris Williamson, Chief Economist at Markit said:

The US economic growth slowed in the third quarter according the PMI surveys, down to around 2.2%. But this largely represents a payback after growth rebounded in the second quarter, suggesting that the economy is settling down to a moderate rate of growth in line with its long term average.

Hiring also remains relatively robust, albeit down from earlier in the year, again suggesting that the economy has shifted down a gear but remains in good health.

“At the moment it remains unclear as to whether growth will weaken further as wemove into the fourth quarter. However, with inflationary pressures waning, policymakers may have some breathing space to gauge the extent of any slowdown. Lower fuel costs helped push average prices charged for goods and services dropping at steepest rate for nearly five years.

Markit composite index
Markit composite index Photograph: Markit/Markit

Updated

Wall Street opens higher

In tandem with other global markets, Wall Street is moving ahead strongly.

The Dow Jones Industrial Average is up 164 points or 12%, while the S&P 500 has opened 0.5% higher.

Markets are being driven by hopes that central banks will not pull the plug on financial support in the immediate future. Friday’s poor US jobs numbers have convinced investors that the prospect of a Federal Reserve rate rise this year is looking less and less likely.

Another factor supporting the market is a rising oil price, which is boosting energy shares. Brent crude is up 2% after reports that Russia wants to meet other producers to discuss the market, where oversupply and falling demand have sent oil prices sharply lower. That could, believe some, presage production cuts. Meanwhile Friday also saw a fall in the number of rigs drilling for oil in the US.

China can manage its economic slowdown but needs to communicate policy more effectively, says the International Monetary Fund.

Ahead of its annual meeting the IMF said China’s exchange rate was in line with medium term fundamentals after the recent devaluations, Reuters reports.

Global corporations are avoiding tax to the tune of up to $240bn a year, according to a new report from the OECD, which has also announced reform measures to tackle the problem. Simon Bowers reports:

An unprecedented international collaboration on tax reform, led by the G20 nations and targeting many of the world’s largest global corporations, will wipe out much of the tax avoidance industry, it was claimed today.

The two-year reform programme, under the auspices of the OECD, was prompted by a spate of revelations in recent years about the tax affairs of multinationals including Starbucks, Google and Amazon.

Alongside the final batch of reforms, published today, the OECD released what it called “extremely conservative” estimates suggesting large global businesses were shifting profits and eroding the tax receipts of economies around the world at a cost of $100bn (£65bn) to $240bn a year — equivalent to between 4% and 10% of global corporation tax revenues.

In the face of increasingly aggressive tax avoidance, countries have been forced to rely more heavily on taxing income less able to be shifted abroad — such as workers’ pay and VAT.

“[The reforms will help] move away from an era when tax planning had become part of core business models,” said Pascal Saint-Amans, who has led the two-year OECD reform programme, backed by 60 countries representing more than 90% of the world’s economy. “Value creation [should be] the core business of industry. Tax planning should just be some supportive, marginal activity… The tax world will not be the same.”

Read more here:

Lunchtime summary: Growth fears after weak services data

A quick recap:

Britain’s recovery slowed last month, according to the latest survey of its dominant service sector.

Companies reported that activity grew at the slowest pace in two and a half years. Economists blame fears over China’s economy, and predict that GDP could grow by just 0.4% in the last three month of this year.

Expansion across the eurozone also eased back in September, data firm Markit reports. Firms in Germany, Spain and Ireland all said growth was slower, although France’s bucked the trend.

European stock markets are up. Shares are being driven by hopes that central banks will continue to stimulate the global economy, and resist early interest rate rises.

The FTSE 100 is now at its highest point of the day, up 132 points at 6262. The French CAC has soared by over 3%.

Two dozen Pacific-Rim countries are celebrating the creation of a major new trade partnership.

Workers have stormed the boardroom of Air France today, as the airline announced plans to cut 2,900 jobs. Two senior executives were forced to flee with ripped shirts.

TOPSHOTS Director of Air France in Orly Pierre Plissonnier, nearly shirtless, tries to cross a fence, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Air France director Pierre Plissonnier, nearly shirtless, tries to cross a fence after several hundred of employees invaded the firm’s offices today. Photograph: Kenzo Tribouillard/AFP/Getty Images

The Greek government is preparing its new budget. Alexis Tsipras’s government must explain how it will implement tough tax rises and spending cuts demanded by lenders.

Finance minister Euclid Tsakalotos is meeting fellow eurozone finance ministers in Brussels today. They’ll discuss the various prior actions Greece must deliver to receive its next aid tranche, and to open talks on debt relief.

And in the UK, chancellor George Osborne has confirmed that he’s selling off shares in Lloyds Banking Group to the public at a chunky discount.

Updated

European commissioner Pierre Moscovici tweets from Brussels:

The Trans-Pacific Partnership deal is “a huge strategic and political win for US President Barack Obama and Japan’s Shinzo Abe,” says the FT’s Shawn Donnan.

He writes:

It represents the economic backbone of the Obama administration’s strategic “pivot” to Asia and a response to the rise of the US’s chief rival, China, and its growing regional and global influence.

It is also a key component of the “third arrow” of economic reforms that Mr Abe has been pursuing in Japan since taking office in 2012.

Here’s the FT’s take (£): Negotiators strike Pacific trade deal

Historic TPP trade deal agreed

Over in Atlanta, a dozen Pacific Rim nations have reached the most sweeping trade liberalization pact in a generation.

After late hitches over drugs monopolies, and New Zealand’s dairy market, the Trans-Pacific Partnership (TPP) has been hammered out. It is meant to lower trader barriers in the region, and set common standards in around 40% of the world economy.

My colleague Martin Farrer explains:

The TPP aims to lower trade tariffs between the signatory nations and bring in wide-ranging new regulations for investment, agriculture, intellectual property, labour and the environment. This in turn could mean cheaper food, medicine and everyday household goods for millions of people. It will also help the 12 countries to counter China’s rising economic influence in the region.

More here:

Updated

The Brussels press pack are assembling for today’s meeting of finance ministers, where Greece’s new bailout package will be discussed.

But it’s not as exciting as the eurogroup meetings we enjoyed (or was it endured?) this summer, so there’s more space outside:

Updated

Greeks brace for austerity budget

Prime Minister of Greece Alexis Tsipras in parliament last night.
Prime Minister of Greece Alexis Tsipras in parliament last night. Photograph: George Panagakis/Pacific Pres/BI/.

The Greek parliament is back in full force today with prime minister Alexis Tsipras outlining his newly elected government’s policy programme as the draft 2015 budget is also submitted.

Our correspondent Helena Smith reports from Athens

After a week of diplomacy abroad, the Greek prime minister must now face the music of applying what will be the most onerous financial rescue programme to date. It will not be easy.

From months of often fraught negotiations just getting to the point of reaching agreement over the bailout deal, the debate has shifted from the abstract to the real with Greeks now being bombarded with news of what the latest accord will entail. The draft budget is expected to outline an array of hard hitting levies, including the much-hated property tax known as Enfia, as well as pension cuts and structural reforms – the price of being bailed out for a third time to the tune of €86bn.

The measures will throw the debt-stricken economy into recession with the budget forecasting a return to growth in 2017 (for many a conservative estimate).

The Greek finance minister, Euclid Tsakalotos, who is on his way to Luxembourg, will outline the savings and government priorities when he meets euro area counterparts attending tonight’s Euro Group.

One insider tells us:

“He will present the prior actions lenders are demanding at the meeting,”

“These are the first package of measures we have agreed to apply [in exchange] for loans.”

The measures, which are expected to include deep cuts to monthly pensions over €1,000, have to be implemented in the coming weeks – before more than 60 others are enforced in November for international creditors to begin a review of the Greek economy.

All of which is going to require nifty explanation when Tsipras (whose radical left Syriza party was first catapulted into office vowing to “cancel” such measures) takes to the podium to present the policies of his second term in office at 7:30pm this evening.

Unions and leftists are already girding for battle. “We are organising the response of popular workers to the new wave of attack,” the communist Pame announced this morning, calling on Greeks to participate in a mass rally on October 22 and a strike on November 12.

Updated

Air France-KLM has criticised those responsible for today’s violence, and insisted that most staff were protesting peacefully before a group burst into its boardroom.

A spokesman said:

“This violence was carried out by particularly violent, isolated individuals, whereas the protest by striking personnel was taking place calmly up until then.”

Air France assistant director long-haul flight, Pierre Plissonnier, left, is protected by security guards as he flees the Air France headquarters at Roissy Airport, north of Paris, France, after scuffles with union activists. Monday, Oct. 5, 2015. Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting about the job cuts, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection. (AP Photo/Jacques Brinon)
Air France assistant director long-haul flight, Pierre Plissonnier, left, is protected by security guards as he flees the Air France headquarters. Photograph: Jacques Brinon/AP

Associated Press has more details on the Air France protests this morning:

Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection.

An Associated Press photographer saw about a hundred activists rush the building. The managers who fled included the head of human resources.

Alexandre de Juniac, the CEO of Air France-KLM, announced Friday the company would have to cut jobs after failing to reach an agreement with pilots. French media reported a proposal to slash 2,900 jobs.

De Juniac said the company was being squeezed by low-cost airlines in Europe and Gulf carriers for long-haul flights. Monday’s meeting was intended to detail the cuts, which he told Europe 1 radio would be “significant.”

Employees of Air France shout slogans inside the company headquarters in Roissy-en-France, on October 5, 2015, interrupting the launch of the plan at a central committee meeting.
Employees of Air France shout slogans inside the company headquarters in Roissy-en-France, on October 5, 2015, interrupting the launch of the plan at a central committee meeting. Photograph: Kenzo Tribouillard/AFP/Getty Images

Fortunately, Xavier Broseta and Pierre Plissonnier did manage to escape the demonstrators, sans chemises.

Air France director of Human Ressources, Xavier Broseta, right, and Air France assistant director long-haul flight, Pierre Plissonnier, center, are protected by a police officer as they flee Air France headquarters at Roissy Airport, north of Paris, after scuffles with union activist, Monday, Oct. 5, 2015. Union activists protesting proposed layoffs at Air France stormed the headquarters during a meeting about the job cuts, zeroing in on two managers who had their shirts torn from their bodies, scaled a fence and fled under police protection. (AP Photo/Jacques Brinon)

Air France execs lose their shirts as workers storm HQ

Over in Paris, two Air France executives appear to have had their shirts ripped from their backs after the airline announced plans to cut up to 2,900 jobs.

According to local media reports, several hundred workers stormed the airline’s headquarters this morning, after it announced the cutbacks.

Photos from the scene show Pierre Plissonnier, Air France’s assistant director for long-haul flights, leaving the scene in a disheveled state.

Director of Air France in Orly Pierre Plissonnier, nearly shirtless, runs away from the demonstrators, helped by security officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Pierre Plissonnier, the director of Air France in Orly, running away from the demonstrators, helped by security officers, after several hundred of employees invaded the offices of Air France. Photograph: Kenzo Tribouillard/AFP/Getty Images
Director of Air France in Orly Pierre Plissonnier, nearly shirtless, walks away from the crowd, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Plissonnier walking away from the crowd. Photograph: Kenzo Tribouillard/AFP/Getty Images

Human resources boss Xavier Broseta is pictured trying to climb a fence to flee.

Xavier Broseta, Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security after employees interrupted a meeting at the Air France headquarters building in Roissy<br />A shirtless Xavier Broseta (C), Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security after employees interrupted a meeting with representatives staff at the Air France headquarters building at the Charles de Gaulle International Airport in Roissy, near Paris, France, October 5, 2015.” width=”1000″ height=”662″ class=”gu-image” /><br />
<figcaption> <span class=Xavier Broseta, Executive Vice President for Human Resources and Labour Relations at Air France, is evacuated by security. Photograph: Jacky Naegelen/Reuters
Human Resources Assistant Manager of Air France Xavier Broseta, shirtless, tries to cross a fence, helped by security and police officers, after several hundred of employees invaded the offices of Air France, interrupting the meeting of the Central Committee (CCE) in Roissy-en-France, on October 5, 2015. Air France-KLM unveiled a revamped restructuring plan on October 5 that could lead to 2,900 job losses after pilots for the struggling airline refused to accept a proposal to work longer hours. AFP PHOTO / KENZO TRIBOUILLARDKENZO TRIBOUILLARD/AFP/Getty Images
Broseta then tried to cross a fence, helped by security and police officers. Photograph: Kenzo Tribouillard/AFP/Getty Images

It’s not clear exactly what happened. But the AFP newswire reports that CEO Frederic Gagey “made a hasty exit, according to two members of the committee”, after workers broke into the meeting.

Unions have also called a strike to protest at the job cuts, which were announced after pilots turned down a proposal to work 100 more hours per year for the same salary.

It could see 300 pilots, 700 air hostesses and stewards, and 1,900 ground staff laid off by 2017.

Le Figaro reports that Air France is planning to file a complaint of “aggravated violence”. More here.

Updated

European stock markets aren’t panicking at today’s service sector slowdown.

Instead, they continue to rally –– catching up with Wall Street’s late jump on Friday night.

France’s CAC index is the best performer, following the news that its services firms actually caught up (a little) with the rest of the eurozone last month.
But other markets are also gaining ground, with the FTSE 100 jumping over around 2%, despite warnings that the economy may be slowing down.

European stock markets, 11am October 05 2015
European stock markets, 11am today. Photograph: Thomson Reuters

So what’s going on?

Well, investors do seem confident that the US Federal Reserve won’t raise rates this month, and probably not before 2016.

That’s bullish for shares, and also weakens the US dollar — which has a positive effect on commodity prices and oil. And that’s why mining shares are up today, while Royal Dutch Shell has gained 4%.

Jasper Lawler of CMC says:

UK and European markets were higher across the board on Monday, playing catch-up from the biggest turnaround on the Dow Jones Industrial Average in four years on Friday.

The French CAC was higher by over 2.5% supported by positive French service sector data. Missed expectations for Germany’s service sector took the edge off gains on the DAX, which was still higher by over 1.5%.

A new survey of Britain’s top finance chiefs confirms that the UK economy may be weakening.

Our Katie Allen reports this morning:

China’s downturn, the prospect of rising interest rates and uncertainty about the global economic outlook have knocked confidence among bosses of the UK’s biggest companies, according to a survey.

Chief financial officers (CFOs) polled by the consultancy Deloitte reported a sharp rise in uncertainty facing their businesses and have scaled back their expectations for investment and hiring over the coming year.

Almost three-quarters of the 122 CFOs, or 73%, said the level of financial and economic uncertainty was either above normal, high or very high. That was up from 55% in the second quarter of this year and is the highest proportion for more than two years.

More here:

Deloitte survey of CFOs
Uncertainty is rising…. Photograph: Deloitte/Guardian

Economist Howard Archer, of IHS Global Insight, fears UK economic growth could stumble in the last quarter of 2015:

UK "recovery at risk" from Chinese chill

The slowdown across Britain’s service sector is putting the recovery at risk, says David Noble CEO at the Chartered Institute of Procurement & Supply.

He blames the knock-on effect of China, which sparked global market panic in August after Beijing devalued the yuan.

Noble says:

The further softening of growth in the services sector must now be causing some concern for the sustainability of the recent recovery in the UK economy….

It appears that when China sneezes, the world catches a cold as some companies cited the region as a cause for worldwide concern.

Some instant reaction to the slowdown in Britain’s services sector:

UK service sector growth hits 2.5 year low

Britain’s service sector suffered a sharp slowdown last month, new data shows, raising fears that the economy may be faltering.

Data firm Markit reports that activity across the sector grew at its slowest rate since April 2013 in September. Its service PMI fell to 53.3, from August’s 55.6 (where 50=stagnation).

Firms reported that new business slowed, with some clients unwilling to place new contracts in the current “global economic uncertainty”.

More encouragingly, firms did keep hiring staff, but business investment is also under pressure.

And with Germany, Ireland and Spain’s service sectors also slowing (see last post), signs are building that the European economy may be faltering.

UK service PMI, September 2015
The blue line = today’s PMI survey Photograph: Markit

Markit’s Chris Williamson fears that “the economy sank further into a soft patch at the end of the third quarter”, and is only growing at 0.3% per quarter.

Services makes up around three-quarter of the UK economy, so any slowdown has serious consequences.

Williamson says:

“Weakness is spreading from the struggling manufacturing sector, hitting transport and other industrial-related services in particular.

There are also signs that consumers have become more cautious and are pulling back on their leisure spending, such as on restaurants and hotels.”

Updated

Eurozone service slows, putting more pressure on ECB

Growth across Europe’s private sector is slowing, according to the latest healthcheck of the region’s service sector.

Markit’s Eurozone PMI, which measures activity at thousands of companies, dipped to a four-month low of 53.6 in September, down from 54.3 in August. That shows the sector kept growing, but at a slower rate.

Growth in the service sector hit a seven-month low, with the Services PMI dropping to 53.7 from 54.0.

Growth in Spain hit its lowest level since January, although France – usually a laggard in these surveys – clawed back some ground:

Here’s the detail:

Eurozone PMIs, September 2015
Eurozone PMIs, September 2015 Photograph: Markit

Chris Williamson, chief economist at Markit, reckons that the slowdown could raise the chances of fresh stimulus measures from the European Central Bank:

“The final PMI reading came in slightly below the earlier flash estimate but still leaves a signal of the eurozone economy having expanded 0.4% in the third quarter.

“However, the failure of the economy to pick up speed over the summer will be a disappointment to the ECB, especially with job creation sliding to an eight-month low.

“The weakening of the pace of expansion in September raises the risk of growth fading further in the fourth quarter, which would in turn boost the likelihood of the ECB opening the QE taps further.

Mining stocks are packing the top of the FTSE 100 leaderboard:

Top risers on the FTSE 100
Top risers on the FTSE 100 this morning. Photograph: Thomson Reuters

That shows optimism that central banks will do more to stimulate the global economy, now that the US labor market appears to be weakening.

Tony Cross of Trustnet Direct explains:

Consensus is building that the Federal Reserve won’t now be in a position to hike interest rates before the end of the year. This gives emerging markets a little more breathing room and it’s the mining stocks that are forging their way to the top of the table.

Updated

European markets jump on stimulus hopes

Shares are rallying across Europe this morning, fuelled by hopes that central banks keep topping up the punchbowl for longer.

France’s CAC index is the biggest riser, up nearly 2%, and Germany’s DAX gaining 1.3%.

The FTSE 100 is close behind, up almost 100 points, as traders shake off their disappointment over Saturday night’s rugby.

European stock markets, October 05 2015

Investors have had a weekend to ponder Friday’s disappointing US jobs report, and concluded that a weak labor market means the Federal Reserve will resist raising interest rates in 2015.

And that’s encouraging them back into the market.

Kim Young-jun, a stock analyst at SK Securities in Seoul, explains (via Reuters)

“Risk aversion weakened today as the weak U.S. employment data supported expectations that the Fed would put off the timing of rate hikes.”

Glencore’s shares have rallied by 8% in early trading in London, fuelled by that takeover talk and speculation that it could sell its agricultural business.

They’re up 7.8p at 108.6p, having briefly jumped 20% to 114.45p. That’s quite a recovery, given they slumped to 66p last week.

However, it’s a weaker rally than in Asia, though, where they spiked 70% at one stage today.

Glencore has just issued a statement to the City, saying it is:

…the Board confirms that it is not aware of any reasons for these price and volume movements or of any information which must be announced to avoid a false market in the Company’s securities or of any inside information that needs to be disclosed…

That could dampen some of the chatter that a big deal is close…..

Updated

Treasury to sell £2bn Lloyds stake to public

Lloyds Bank shares to go on sale to the British public<br />epa04963989 (FILE) A file photograph showing a sign outside a Lloyds bank branch in London, Britain, 23 October 2014. According to news reports, on 05 October 2015 the British Chancellor of the Exchquer, Geroge Osbourne, has announce that 2 billion GBP or 2.7 billion euro worth of Lloyds Bank shares to go on sale to the British public. EPA/WILL OLIVER” width=”1000″ height=”631″ class=”gu-image” /> </figure>
<p><strong>Seven long years after bailing out Lloyds Banking Group, the UK government is finally selling some of its remaining stake to the public.</strong></p>
<p><a href=The Treasury has announced plans to sell £2bn of Lloyds shares in a retail offering. Anyone taking part will get a 5% discount, plus a bonus shares for every 10 they hold for at least a year.

The value of the bonus share incentive will be capped at £200 per investor. People applying for investments of less than £1,000 will be prioritised.

The move brings a bit of Thatcherite glamour (?!) to the Conservative Party conference, where delegates fondly remember the “Tell Sid” privatisation fetish drive of the 1980s.

But as the Economist’s Stan Pignal points out, discounted share sales benefit some rather more than others….

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Reports that Glencore is in talks to sell its entire agriculture business are helping to drive its shares higher.

That would provide fresh resources to tackle its $30bn debt mountain, and to handle a further drop in commodity prices.

Glencore shares surge on sale talk

Something is going on at Glencore, the troubled commodity trading and mining company.

Shares in Glencore leapt by over 70% in Hong Kong overnight, and are currently up over 30%.

This comes after the Daily Telegraph reported that Ivan Glencore is prepared to listen to takeover offers for the company he has created, following the recent slump in its value.

Their commodity editor Andrew Critchlow wrote:

Glencore would listen to offers for a takeover of the entire company but its management does not believe there are any buyers willing to pay a fair value for the business in the current market.

That report appears to have sparked a wave of buying into Glencore, whose shares have lost around three-quarters of their value in the last year.

Glencore itself, though, says it’s “unaware” of the reason behind the surge, according to Bloomberg’s Jonathan Ferro.

American Apparel files for bankrupcy

Big news breaking in the retail sector — American Apparel, supplier of ethical clothing and god-awful adverts, has filed for bankruptcy protection.

The move follows a steady slide in sales, and ever-more disturbing antics by ex-chairman Dov Charney, who was forced out a year ago.

The Agenda: US jobs report lingers

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

A new week begins with investors digesting still last Friday’s disappointing US jobs data.

September’s Non-Farm Payroll was a bit of a shocker, with just 142,000 new jobs created, and wages unchanged month-on-month. That suggests America’s economy is being hit by the slowdown in emerging markets such as China, raising fears that a new downturn is looming.

And that has actually pushed shares higher in Asia this morning on speculation that monetary policy is going to stay loose for even longer.

Japan’s Nikkei gained 1.6%, while the Indian market is up around 1.5%:

We’ll get a fresh insight into the health of the global economy today, when new surveys of the world service sector are released.

Those Purchasing Managers Surveys will show if growth speeded up or slowed down; we get the eurozone report at 9am BST and the UK at 9.30am BST.

And over in Greece, Alexis Tsipras’s new government will be presenting its new budget, ahead of a vote on Wednesday.

We’ll be tracking all the main events through the day….

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