20.45 Looking ahead, tomorrow kicks off with German retail sales figures at 7am, followed by Italian unemployment figures at 9am, and UK services data at 9.30am.
The service sector powers around 75pc of the British economy. Growth is expected to slow in December.
Then, at 10am, a bond bonanza from France, which will see it issue a range of long-term debt ranging from ten to 40 years.
From the US, initial jobless claims are out at 1.30pm, followed by ISM non-manufacturing data - aka US services.
19.57 This means that GSEs such as Fannie and Freddie must ride the fine line of:
...pursuing a policy of reducing their near-term losses and risk exposure versus adopting policies to support the broader housing market. Aggressively putting back delinquent loans to lenders helps the GSEs maximize their profits on old business and thus limits their draws on the U.S. Treasury, but at the same time, it discourages lenders from originating new mortgages.
19.55 The report goes on to explore the "unresolved role of the government-sponsored enterprises (GSEs)" such as Fannie Mae and Freddie Mac, and the potential conflicts of interest that might arise on the road to recovery:
In many of the policy areas discussed in this paper--such as loan modifications, mortgage refinancing, and the disposition of foreclosed properties--there is bound to be some tension between minimizing the GSEs? near-term losses and risk exposure and taking actions that might promote a faster recovery in the housing market. Nonetheless, some actions that cause greater losses to be sustained by the GSEs in the near term might be in the interest of taxpayers to pursue if those actions result in a quicker and more vigorous economic recovery.
19.30 A white paper on the US housing market released by the Federal Reserve today highlights the hurdles the sector faces as it limps towards recovery:
The ongoing problems in the U.S. housing market continue to impede the economic recovery. House prices have fallen an average of about 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses and an associated ratcheting down of aggregate consumption [...] But the problems also reflect three key forces originating from within the housing market itself: a persistent excess supply of vacant homes on the market, many of which stem from foreclosures; a marked and potentially long-term downshift in the supply of mortgage credit; and the costs that an often unwieldy and inefficient foreclosure process imposes on homeowners, lenders, and communities.
18.54 The FT reports that Spain expects its banks to set aside up to ?50bn on bad property assets as part of a new round of financial sector reforms:
Luis de Guindos, economy minister in the centre-right government that took office two weeks ago after defeating the Socialists, said on Wednesday it was essential that the banks clean up their balance sheets without imposing a burden on the treasury.
The ?50bn figure, equivalent to about 4 per cent of Spain?s GDP, is higher than private expectations by bankers.
18.40 The US has welcomed an EU agreement to ban imports of Iranian oil.
These are the kinds of steps that we would like to see not just from our close allies and partners in places like Europe but from countries around the world [...] We do believe that this is consistent with tightening the noose on Iran economically.
US State Department spokeswoman Victoria Nuland said at a press briefing.
18.30 US markets are little changed in mid-day trade in New York.
The Dow Jones industrial average is currently trading flat at 12,388.83, while the broader S&P 500 is down 0.15pc at 1,275.18. Strong sales at car maker Ford helped offset an early drag caused by US factory orders, which came in weaker than expected.
17.52 Iain Dey, deputy business editor at the Sunday Times, has translated the press release into layman's terms:
17.50 The strain continues. French bank Societe Generale is considering cutting 880 jobs at its corporate and investment banking unit in France under a "voluntary departure plan".
In a statement, SocGen said:
Like other European banks, Societe Generale has been stepping up since the summer the structural adaptation of its Corporate and Investment banking activities, one of the core businesses of the Group?s universal banking model, in order to face a tougher economic and regulatory environment. As a result of the necessary adjustments, Societe Generale is considering reducing the number of positions in its Corporate and Investment banking division by approximately 880 in France, without resorting to layoffs or forced departures.
The bank added that its retail banking operation would be unaffected.
17.30 Mr Papademos added today that Greek workers would have to accept wage cuts to ensure the country's future in the eurozone. He said:
If we want to secure our country?s most important achievement, then we must accept cuts in our income in the short-term, to the degree that is necessary to regain competitiveness and create conditions for higher employment and economic activity [...] We?ll have to accept limited sacrifices to avoid a catastrophic scenario, give up a little so we don?t lose a lot.
17.25 Here's a snapshot of maturing Greek government debt in 2012. Squint, and you might just be able to see ?14.43bn maturing in March.
For Greece, that's pretty big.
17.21 Greece's interim prime minister, Lucas Papademos has warned that Greece will default in March if the government fails to agree a deal with its creditors. In an emailed transcript, he said:
In mid-January, talks begin with the troika which focus on shaping a credible economic adjustment plan for 2012 to 2015 [...] The implementation of the agreement to reduce the debt and continuation of financing of the country depends on that. Without this agreement with the troika and subsequent financing, Greece in March faces the immediate risk of a disorderly default.?
17.09 Speaking ahead of the close, Chris Beauchamp, market analyst at IG Index, said:
London?s leading index has drifted lower throughout the day, with this morning?s gains proving as ephemeral as the post-new year optimism we saw yesterday. To quote T.S. Eliot, who died 47 years ago today, the day-old rally for 2012 appears to be ending not with a bang, but with a whimper. The twin perils of the eurozone crisis and the possibility of slowing Chinese growth have been enough to cause investors to lock in some of yesterday?s gains. The brightest spot in the day was Domino?s Pizza, which gained 7% following news of decent sales growth over 2011 despite the difficult consumer environment.
Yesterday's big winners were today's losers. Commodity giant Glencore fell 3.1pc, while miner Antofagasta dipped 2.7pc.
Elsewhere in Europe, the CAC 40 in Paris finished 1.6pc lower, at 3,193.65, while Frankfurt's DAX 30 finished down 0.9pc, at 6,111.55.
16.55 The Iranians so far remain defiant. One official told Reuters that the country already had alternative outlets available to maintain its 2.3m barrels per day of exports, including sending more crude to China.
16.44 A quick look at the countries that import the most oil from Iran (hover over the pie chart to view percentages):
As you can see, most Iranian oil exports go to Asia. US Treasury secretary Timothy Geithner will travel to China and Japan next week to discuss tougher sanctions against Iran, but as the current ban only applies to EU countries, some analysts suggst that BRICs such as India and China could end up benefiting from the EU move.
Gene McGillan, analyst at Tradition Energy, said:
India, China and some other Asia countries may end up getting a reduced price on Iranian oil and that could be good for their economies, but European countries will have to find other sources.
16.29 As one Greek spokesman reignites concerns about the country's future in the eurozone, another slips out quietly. Former Greek PM George Papandreou has told his PASOK party that he will step down as party leader and not seek re-election.
He told us that he will resign as PASOK leader and that he will not run for prime minister again,"
one deputy told Reuters.
Mr Papandreou rocked markets last year by announcing plans for a referendum on whether to remain in the eurozone. The plans were later scrapped after political parties united behind interim PM and former ECB vice-president Lucas Papademos.
16.15 Gold prices are also ticking up on the back of the EU oil announcement. Spot prices are currently up $6.90 at $1,610.38 as the precious metal enjoys its fourth straight day of gains.
16.07 Julian Jessop, chief international economist at Capital Economics, argues that oil prices are still likely to end the year lower.
We have estimated before that the closure of the Strait of Hormuz could lift the price of Brent crude to as high as $210 per barrel, albeit only temporarily [...] However, we also maintain our view that neither side would want tensions to spiral this far out of control. Indeed, the threat of another ?super-spike? in oil prices when the global economy is still so fragile is itself a very powerful reason for the West to hold off from any military action. There will doubtless be plenty of noise from both sides, but this is unlikely to be decisive in determining the course of oil prices for very long.
Instead, by far the bigger risk is that oil prices will collapse due to an escalation of the financial crisis in the eurozone. This would undermine oil prices both directly ? via the impact on demand from the region ? and indirectly ? via the dampening effect on global risk appetite and the additional support it would provide to the US dollar. In turn, this is the main factor behind our forecast that Brent will still end the year back at around $85 per barrel.
16.00 Back to the EU deal, and a couple of analyst views:
Jonny Tremain, at Ebullio Capital Management, said:
I think it's a little over-hyped. My overall view is that I'm bearish crude - if we didn't have this geopolitical tension crude would be a lot lower. If they did fully ban Iranian oil it would be so harmful for the global economy. I don't think political leaders would make a decision as silly as that.
Helen Henton, head of commodity research at Standard Chartered, added:
I would expect oil prices in Europe, on balance, to be higher if an embargo is imposed, and prices in Asia to be lower. Iran is not going to stop producing oil. It will just have to start selling it elsewhere - and that mostly means to Asia. In the first nine months of last year, Iran sold 65 percent of its oil to Asia - to China, India and other Asian economies - and that should continue. But Asian buyers may end up paying less for it.
In terms of timing, even if a final agreement on an embargo on Iranian oil is reached by the end of January, a ban would probably not be in place until the end of March.
An aircraft carrier rides through the Strait of Hormuz (Photo: Reuters).
15.45 Going on holiday soon? Well, good news if you're heading to the Continent, but not so good if you're travelling across the Atlantic.
The pound has hit a 16-month high against the euro at ?1.2100 as fears of a eurozone recession pushed investors away from the common currency in favour of perceived safer alternatives.
But the dollar is living up to its reputation of being the safest of them all, with sterling slipping slightly against the dollar to $1.5603, which also made gains against the yen.
15.30 More on the EU deal to sanction Iran's oil exports. A final decision will be made on January 30 on oil and bank sanctions.
According to Bloomberg, Greece, which last month objected to a ban on Iranian oil purchases, would now abide by any EU-imposed embargo.
15.11 The Dow slipped a further 35 points following the news. It is currently trading down 0.31pc at 12,358.57.
15.03 BREAKING NEWS...
Orders to US factories rose 1.8pc in November, driven by demand for aircraft. Expected 2pc.
14.50 Brent crude oil has jumped by around $1.50 on news that EU governments have reached a deal in principle to ban Iranian oil imports.
The move came as Iran threatened to choke off crude shipments through the strategic Strait of Hormuz in retaliation against tougher sanctions from the West over its nuclear programme.
Meanwhile, US Treasury secretary Timothy Geithner will travel to China and Japan next week to discuss tougher sanctions against Iran.
14.34 The Dow Jones Industrial Average has fallen 26 points (0.2pc) on opening. The S&P 500 has dropped 0.2pc and the Nasdaq is down 0.3pc.
14.30 EUR/GBP nudges towards January 2011 low at 8285.
14.09 Nick Firoozye, MD and head of European rates strategy at Nomura, had this to say on problems in the eurozone:
13.36 Let's update you on the main news from today. Eurogroup chief Jean-Claude Juncker has stated that Europe is on the brink of recession. This weighed on positive markets, which turned negative. This morning also saw a raft of economic data from around the eurozone. UK construction figures impressed, rising rather than falling, as predicted. Meanwhile, EU inflation falls but remains above target.
13.23 We are hearing reports that the ECB is buying Portuguese and Irish government bonds.
13.02 PIMCO's Bill Gross on a potential Italian bailout by the ECB:
QE by any definition and near Ponzi by another.
12.54 More bad news for Greece. The country's Emporiki Bank has received a ?2bn injection from its French parent group Credit Agricole to "fortify" its position during a state debt writedown.
"Credit Agricole has covered in cash an approximately ?2bn share capital increase, aiming at reinforcing the bank's capital structure," Emporiki said.
However, most Greeks want to weather the economic crisis in the euro, though they expect the situation to get worse, according to a poll carried out by Alco SA for the Athens Chamber of Commerce & Industry.
Of 1,000 people questioned, 71pc said they want Greece to keep the common currency and 17pc said they don?t.
12.36 Great piece by The Telegraph's Richard Tyler after George Osborne's small business job creation scheme flops:
12.11 Spain has no plans to seek external help (i.e EU/IMF loans) to fund its overhaul of the financial industry, Carmen Martinez Castro, the deputy minister for communication, has said.
12.00 Midday, and a quick update of the markets:
FTSE 100: -0.1pc
CAC: -0.8pc
DAX: -0.8pc
MIB: -1.5pc
IBEX: -1.8pc
11.49 Earlier we had Italian services PMI (see 08.52), and now we have the country's inflation figures... and it's not good news.
Italy's inflation rate accelerated sharply in 2011 to an average of 2.8pc compared with 1.5pc in 2010, according to provisional figures published by the National Statistics Institute.
It is the highest figure since 2008, when prices rose 3.3pc.
11.45 The stagnant UK housing market in one simple graph:
11.41 Amazing bit of corporate news: Microsoft is taking legal action against UK retailer Comet for allegedly selling sets of counterfeit Windows Vista and XP recovery CDs.
11.20 Lord Tebbit of Chingford, a senior cabinet minister in Margaret Thatcher's government and former Chairman of the Conservative Party, has blogged for the Telegraph on the euro. He doesn't pull any punches:
I now think that some sort of euro, centred on Germany with a very few other member states, will probably survive within a greater D.Mark zone, but the 17 or 20-plus eurozone will not.
10.53 More bond sales, this time it's Portugal. The country has sold ?1bn in three-month bills at an average yield of 4.346pc (versus 4.873pc previously).
10.44 German Chancellor Angela Merkel is to meet Italian prime minister Mario Monti in Berlin next Wednesday. We've had Merkozy, is this the rise of Merkonti?
10.40 The Telegraph's Jeremy Warner has the latest on Germany's bond auction:
10.32 Markets in Europe (except the UK) have fallen this morning. Banks are down on concerns a cash-strapped market will make it expensive for them to raise capital and for eurozone countries to refinance debt. In a sign of how wary banks are of lending to each other, commercial lenders' overnight deposits at the European Central Bank hit a new record high of ?453bn.
FTSE 100: +0.1pc
Dax: -0.6pc
CAC: -0.7pc
MIB: -1.2pc
IBEX: -1.4pc
10.27 The cost of insuring Hungarian debt against default has hit a new high for the second consecutive day amid concerns the government's unorthodox policies will derail progress of a new financial agreement with the International Monetary Fund. Hungary's forint currency fell to an all-time low versus the euro.
10.17 Bond yields are rising after the EU inflation figures. Spanish 10-year bond yields have jumped 13 points to 5.344, while Italy's have jumped four points to 6.889 - closing in on the dangerous 7pc level. The UK's have risen two points to just over 2pc.
10.04 BREAKING NEWS...
Eurozone inflation was 2.8pc in December (year-on-year). This was in line with consensus and down from 3pc in November.
10.02 A quote from John Maynard Keynes I thought was quite apt:
If I owe you a pound, I have a problem; but if I owe you a million, the problem is yours.
10.00 Just to round up the services data out today from several countries, here's a very interesting graph:
(for a bigger version of this graph, click the right-hand-side of the main picture at the top of this blog)
09.54 A European financial transaction tax will be in place by the end of year, French minister for European affairs Jean Leonetti has said.
This is on the programme for the next European summit [on January 30]. [French President] Nicolas Sarkozy and [German Chancellor] Angela Merkel have decided on this and it will be put in place before the end of 2012.
09.47 Eurogroup chief Jean-Claude Juncker says Europe is on the brink of recession, adding that Greece is not contemplating a return to the drachma.
09. 40 Another bit of corporate news to follow Next's update earlier (see 07.32). John Lewis saw like-for-like sales rise 6.2pc in the five weeks to December 31 compared with previous year. Total sales ?596m.
09.36 BREAKING NEWS...
UK construction PMI rose to 53.2 in December. This beats an expected fall to 51.5 and comes after a figure of 52.3 the previous month. UK construction sector continues to grow.
Mortgage approvals also rose to 52.9k against an expected 52.5k. David Braithwaite, director of the financial advisors Citrus Financial Management, said:
"Looking forward, 2012 will be about matching willing borrowers with reluctant lenders. At best we'll be moving sideways. The problem is that borrowers are hesitant to borrow and lenders aren't overly keen to lend - and the problem gets worse at higher loan-to-values, the very area where we need to see movement and improvement. People buy property when they're confident and confidence is disappearing at roughly the same rate as Christmas cheer.
09.34 Great read here. The Telegraph's Richard Fletcher looks at six ways to check out a retailer's Christmas.
09.25 Here's the BBC's Robert Peston commenting on the news that overnight deposits at the ECB have jumped to a record high of ?453.2bn:
08.55 Germany is up next. Its services PMI grew to 52.4 in December against an expected 52.7 and a previous 50.3.
In the eurozone as a whole, the services PMI rose to 48.8 against a previous figure of 48.3 - still contracting.
08.52 Italy's services PMI is still stuck the wrong side of 50. It posted 44.5 in Decmber, down from 45.8 in November and the seventh straight sub-50 reading. Anything below 50 indicates contraction.
(for a bigger version of this graph, click the right-hand-side of the main picture at the top of this blog)
08.48 And just to brighten up your day even more, here's a quote from Paul Donovan at UBS:
The euro debt crisis is still lurking in the wings with all the charisma of an angel of death.
08.44 UniCredit, Italy's biggest bank by assets, has had its shares supended after dropping 9.9pc this morning. It revealed it sell new shares at 43pc less than yesterday?s closing price, excluding the value of rights, in a ?7.5bn offer to strengthen its capital position.
08.39 Following on from those Next results earlier this morning, the retailer's chief executive Lord Wolfson has said the eurozone debt crisis has started to negatively impact consumer behaviour in the UK.
My sense is the underlying economic situation is slightly worse than it was in September and that the only thing that's really changed is the situation in Europe. The [eurozone] crisis got a lot worse in late November, through December, and I think the headlines were definitely worrying people in that time.
He added that rivals discounting was "more than I've ever seen before".
08.32 And some rare good news for Spain... the country's services PMI has rebounded from November's 32-month low of 36.8 to post 42.1 in December. Still means the sector is contracting, though.
08.29 Overnight deposits at the ECB have jumped to a record high of ?453.2bn, as illustrated in the graph below.
(for a bigger version of this graph, click the right-hand-side of the main picture at the top of this blog)
08.25 French consumer spending figures are out. They show spending fell 2.1pc year on year in November, worse than an expected fall of 1.8pc and following on from a 1pc fall the previous month.
Meanwhile, the Bank of France said it will cut 2,500 jobs by 2020 by replacing half of those retiring, cutting the central bank?s staff to 10,500.
08.13 Richard Fletcher, Telegraph city editor, has led his daily email on Next's trading update:
08.08 FTSE 100 flat in early trading, up just 4.5 points.
07.40 The Telegraph's head of business Damian Reece has looked at the best places to invest your money in 2012:
07.32 Quick update on corporate news. Sales at Domino's Pizza have risen 3.6pc in the 13 weeks to Christmas compared with the previous year. Meanwhile, Next has posted an increase in second-half sales and kept its full-year profit forecast. It added that online sale rose 16.9pc between August and December, but shop sales fell 2.7pc.
07.28 The Guardian has taken a look at a "crunch month for the eurozone", beginning with a French debt auction on Thursday and ending with the troika's reports on Greece on January 31.
07.23 Over at The Times, their business section is reporting that the Governor of Switzerland's central bank is under pressure to explain why his wie transferred $500,000 of Swiss currency into US dollars shortly before authorities intervened to cap the value of the soaraway franc.
07.12 In the markets, the FTSE 100 is expected to open down 0.3pc this morning. This comes after the UK's blue-chip index closed up 2.3pc yesterday in the first trading session of 2012.
07.10 A quick look at the headlines in the business pages in this morning's papers:
Telegraph: Greece 'out of euro' if bail-out fails
Financial Times (?): Fed shakes up policy on rates forecasts
07.00 Good morning and welcome back to live coverage of the debt crisis.
Debt crisis live: archive
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