Global stock markets slide on Greece debt crisis

Stock markets in Britain, Europe and the US have fallen after Greece closed its banks and imposed capital controls.

Stock markets in Britain, Europe and the US have fallen after Greece closed its banks and imposed capital controlsThe moves by the Greek authorities came after the European Central Bank decided not to extend any extra emergency funding.

London’s FTSE 100 index was down 1.47% and Germany’s Dax index fell more than 2%. In the US, the Dow Jones fell nearly 1% early in the session.

Bank stocks are among the hardest hit, with shares of Deutsche Bank and Commerzbank both losing more than 4%.

The Athens Stock Exchange and Greek banks will be closed all week.

On the money markets, the euro lost ground against other major global currencies.

The London FTSE 100 share index was down 98.47 points at 6,655.23 with other European markets seeing even bigger falls. Earlier in Asia, Japan’s Nikkei index fell nearly 3%.

On the currency markets, the euro saw volatile trading in Asia, falling by 2% at one point. However, it has since recovered some ground, with the euro down 0.15% against the dollar at $1.1149.

The euro has weakened against the pound, with one euro now worth £0.7089, while the pound buys €1.4108.

Oil prices are heading lower. Brent crude oil futures fell more than 1.5% to $62.10 a barrel.

Bond yields (an indication of borrowing costs) for Italy, Spain and Portugal – which are considered some of the weaker eurozone economies – rose sharply.

In contrast, German bond yields fell. German bonds are seen as safer investments in times of crisis.

Greece was due to make a €1.6bn payment to the IMF on Tuesday – the same day that its current bailout expires.

Last week, talks between Greece and the eurozone countries over bailout terms ended without an agreement, and Prime Minister Alexis Tsipras then called for a referendum on the issue to be held on 5 July.

At the weekend, the Greek government confirmed that banks would be closed all week, and imposed capital controls, limiting bank withdrawals to €60 (£42) a day.

There is zero chance of the European Central Bank turning Emergency Liquidity Assistance back on – life-saving lending to banks – unless Greeks give an affirmative vote to a bailout proposal from the rest of the eurozone and the IMF, which Juncker sees as a proxy for Greece’s monetary future.

As for Athens, most of the Syriza government detests the bailout offer – for the way it pushes up VAT and cuts pensions.

So we will have the bizarre spectacle of a Prime Minister, Alexis Tsipras, arguing both against the bailout and for remaining inside the eurozone – so goodness only knows how he will vote.

And Greek people will be torn between fear and loathing of bailout proposals that will damage the living standards of many of them, and fear and loathing of abandoning the euro and seeing their banks closed.

Greek worries wise money markets

European stock markets have fallen sharply as senior EU officials have discussed a possible Greek default for the first time.

European stock markets have fallen sharply as senior EU officials have discussed a possible Greek defaultThe Athens stock exchange closed nearly 6% lower, while Germany’s Dax and France’s Cac 40 closed more than 1% lower.

Stocks in the National Bank of Greece fell by more than 10%, while Piraeus Bank fell more than 11.5%.

According to official sources quoted by news agencies, senior eurozone officials meeting in Bratislava on Thursday held their first formal talks on the possibility that Greece might default on its debt payments.

Also on Thursday, officials from the International Monetary Fund (IMF) pulled out of talks with Greek politicians in Brussels, citing “major differences”.

Greece is seeking to avoid defaulting on a €1.5 billion debt repayment to the IMF by the end of June.

Shares on the Athens Stock Exchange had soared on Thursday amid renewed optimism about Greece’s talks with its creditors.

The index climbed more than 14% – the best performance in several weeks, but the IMF’s withdrawal has dampened investors’ moods.

On Friday, Jeroen Dijsselbloem, president of the Eurogroup of finance ministers, said a deal without the IMF was “unimaginable”.

However, German Chancellor Angela Merkel urged all parties to continue negotiations.

Speaking at a business conference in Berlin, Ms Merkel said: “Where there’s a will there’s a way, but the will has to come from all sides, so it’s important that we keep speaking with each other.”

In London shares continued their downward slide as fears over Greece’s ability to negotiate a settlement with European creditors dented sentiment.

At the close, the benchmark FTSE 100 index was down 61.82 points, or 0.9%, at 6,784.92.

The top riser was Royal Mail, up 2.78%, recouping some of Thursday’s losses.

The postal services company had fallen 4.5% on news that the government had sold 15% of its remaining 30% stake in the company, raising £750m.

The biggest faller on the 100-share index was Johnson Matthey, down 3.1%. On the FTSE 250, platinum producer Lonmin fell 7.1%, compounding earlier losses in the week, after mining and commodity firm Glencore distributed its 23.9% stake in the company to investors.

On the currency markets, the Pound was up 0.41% against the Dollar at $1.5581 and up 0.25% against the euro at €1.3818.

Flat month for UK markets

U.K. shares cut their monthly gains in the last minutes of trading at the end of May.

U.K. shares cut their monthly gains in the last minutes of trading at the end of MayIn what was otherwise a volatile day for the markets, the FTSE 100 plunged in afternoon trade to close the month 56.49 points lower at 6,984.43 amid continued uncertainty regarding the Greek debt situation and disappointing first-quarter GDP data from the US.

Greeks say they will pay the IMF their next debt installmenty this week as capital flight hits a new record.

The FTSE 100 Index slid 0.8 percent to 6,984.43 at the close of trading in London. The gauge fell 0.7 percent this week, trimming its monthly gain to 0.3 percent. The volume of shares changing hands was 32 percent greater than the 30-day average.

The broader FTSE All-Share Index dropped 0.7 percent on Friday, while Ireland’s ISEQ Index lost 1.4 percent.

A slew of upgrades sent shares higher. Engineering group Weir advanced 48p, or 2.4pc, to £20.24 after Credit Suisse raised its price target from £19.15 to £22.05.

Ophir Energy also made gains of 4.2p, or 3.3pc, to close at 131.4p as Barclays raised its target price to 225p from 200p owing the upgrade to the company’s ability to “take advantage of declining industry costs”.

Conversely, Ashtead Group tumbled to the bottom of the FTSE 100 for the second consecutive day, falling 41p to £11.20 after its US rival United Rentals had talked down May activity at an industry conference in the US on Thursday.

Joining the laggards, Synergy Health plummeted in afternoon trade, shedding 72p, or 3.8pc, to £18.23 following a move by the US Federal Trade Commission to block its $1.9bn merger with US peer Steris. Both companies said they would fight the lawsuit. Analysts at Canaccord Genuity described it as a “simple transaction” that has become “complex”.

Positive Greek bond buyback compounds German economic sentiment

Wise Money Markets in Europe have gained momentum and surged to an 18 month high following the German ZEW economic investor confidence figures released yesterday which showed a jump in December way above market expectations.Positive Greek bond buyback compounds German economic sentimentThe cause was supported in the Eurozone by renewed optimism that Greece has been successful in drawing enough bonds to its sovereign debt buyback to ensure further aid requirements are unlocked by the IMF and EU.

Although the bids attracted €31.8 billion, the price paid for the bonds were higher than expected, meaning the reduction will fall short of expectations.

Consequently, this means that the debt to GDP ratio will be reduced to 126.6% in 2020, contrary to the forecast of 120%-  the currency has raced up to 1.30 levels against the US Dollar.

This positive sentiment in the Eurozone led Spanish borrowing costs to fall, however there are still concerns over the political instability in Italy, which did not seem to stop the surge in the single unit currency.

Over to the US, markets are still trading with cautious fervour as speculation continues to mount that the US Federal Reserve will add to its monthly bond purchases with further QE which also led the currency to weaken.

We still await the results of the 2 day Fed meeting that begins today to hear further details, where they will announce $45 bn of Treasury bond buying.

Though the economy seems to be gradually improving, the Fed continues to add stimulus but may be faced with higher inflation and a weaker dollar in the near future.

The US fiscal cliff talks are also still being discussed as they try and reach an agreement as to the measures taken to reduce their debt, set to come into force in January.

Positive sentiment from the Eurozone coupled with speculation of QE in the US, led Sterling to strengthen against the Greenback as we breached the 1.61 level.

We also expect unemployment figures from the UK later this morning, expected at 7.8%. Any figure that comes out higher than this could lead to a bit of weakness in the pound.

Greece deal a damp squib for the euro

Money markets across the globe saw a somewhat subdued surge overnight, despite the Greece deal having been passed which was offset by concerns over the fast approaching US Fiscal Cliff decisions to be made.
Greece deal a damp squib for the euroWhile most people expected the euro to gain some strength once the bailout deal had been approved, investors remained cautious and the currency failed to break the 1.30 barrier against the greenback as concerns grow on whether the deal will actually help Greece reduce its GDP target from 144% to 120% over the next 8 years or will it force Greece to remain locked in the Eurozone facing further stark austerity measures and low growth.

The first loan instalment of 34.4 billion will be disbursed this December.

Even though the Greek PM Antonio Samaras has issued a statement that it is a reforming move for Greece, most markets are still sceptical whether Greece actually has the tools and the discipline to ensure that further requirements are met.

For now, the only bit of good news for the Eurozone is that they have managed to keep the country as part of the union.

The build up over the meeting saw the euro move to a high of 1.30 against the dollar, but quickly started losing its initial gains and ended up at 1.2930 levels.

Also, the European Stability Mechanism (ESM), a fund setup to help struggling economies, has been approved by the European Court paving the way for other nations like Spain to request aid.

We had unemployment figures from France, which showed that it hit a 14 year high in November increasing unemployment numbers in the country by 45400 bringing the total to 3.1 million people out of work.

We also had a US consumer confidence figure yesterday, the results of which showed that the US economic sentiment has moved to a 4 year high at 73.7 in November.

The currency enjoyed some strength as the Core Durable goods numbers comfortably beat expectations.

However, investors are now beginning to panic, since the talks on the ‘fiscal cliff’ programme have hardly made any progress so far.

Yesterday also witnessed the release of the UK GDP figures, which increased by one percent in the third quarter this year.

Since the figures show an emergence from a double dip recession, the Great British Pound surged to levels over 1.60 against the dollar.

However, with the OECD cutting future growth forecasts from 1.9% to 0.9% for 2013, the Pound has struggled to move beyond the 1.6020 levels, raising concerns that George Osborne will struggle to meet the deficit targets set out.

Positive Greek deal suggested by eurogroup

The Single European currency was unperturbed as Eurogroup members reached a conditional response to Greece’s necessary fiscal measures.Positive Greek deal suggested by eurogroupThey have approved to cut debts by €40 billion and have cemented the way for releasing the next tranche of bailout loan.

EU leaders emphasised during their press conference that Greek uncertainty has been resolved and praised the Greek government for their strong pledge to achieving a sustainable future.

The written statement suggests Greek aid “contingencies” would provide that Greece must continue to form its reserve account which is used to reduce debt, while the IMF is demanding that Greece must give up work a portion of its unpaid sovereign debt.

But, this job may be tough as the statement also documented the “deterioration” to the economy which might lead to cash flow difficulties.

Over to the US and Consumer confidence this afternoon is expected to show the highest reading for four years reaching 73.0 for November.

The data arrives alongside improvements in household sentiment could see further support for the Greenback reducing pressure on the Fed for additional monetary support.

The head of the Fed Ben Bernanke predicts a more broad-based recovery and we should see the central bank move away from its easing policy and the FOMC may continue to sit on the side-lines as the December 12 meeting as the region gets on a more sustainable path.

Back to the UK and yesterday we saw Canadian central bank Chief Mark Carney named as new Bank of England governor.

The former Goldman Sachs manager has a strong reputation and has been praised for this ‘pragmatic’ response to the financial crisis during his reign in Canada.

He is considered more hawkish that King following a rate rise in Canada to offset a housing bubble and may lead to the UK reducing QE and look to a rate increase in the near future.

The appointment is the first foreign head of Britain’s central bank in 318 year history and he will be the one of the most influential unelected officials in the UK.

Third time lucky for the Greek negotiations?

This week we have the resumption of the Euro group meeting to discuss the possible extension to the Greek restructuring plans.Third time lucky for the Greek negotiations?With the meeting last week producing nothing but another meeting there are high expectations on the IMF and Eurozone politicians to thrash out a plan that suits all involved.

With the announcement that Spain will receive €35 billion for the nations struggling banks any deal in regards to Greece will be taken as bullish by the markets.

With what started as a week of hope ended without much resolution from the all important Eurozone and EU Summit’s.

There was, however, a shift in sentiment last week which saw more risk-on in the markets with signs of growth in China as well as the possibility of wide spread Monetary Stimulus in Japan.

In Late trade on Friday we saw markets gain a sudden boost of confidence raising eurov US Dollar to 1.2968 and GB Pound/USD 1.6005.

In the US we have continuing negotiations in Congress over the “Fiscal Cliff” that is due to set in on January 1st.

After, what appears to be, the start of the US recovery these talks will be more prominent.

Tomorrow, US Durable goods orders are expected to show a negative figure with Fed Chairman Ben Bernanke speaking later in the day, likely to centre on the global economy and issues facing the continuing US Recovery.

This week we have the UK GDP being released, expected to show no growth YoY as George Osborne and David Cameron continue harsh budget cuts in place, even though the UK is likely to miss the deficit reduction target with last week’s figure showing Public Sector Net Borrowing actually increasing in October.

Euro strengthens on positive Chinese economic output

Equities across Europe have started strong this morning for a fourth consecutive day following positive signs that China’s manufacturing is improving.Euro strengthens on positive Chinese economic outputThe release overnight signals the first expansion in China’s factory output in 13 months and boosted optimism that growth in the world’s second largest economy is on the road to recovery after a seven quarter slowdown.

The initial reading was 50.4 for a Chinese purchasing managers’ index released today by HSBC Holdings Plc and Markit Economics and falls above the last reading of 49.5 in October. A reading above 50 indicates growth.

A recovery in manufacturing would support prospects for a continued pickup in economic growth that slowed last quarter to the weakest pace in more than three years.

Over to Europe and data tomorrow will indicate modest growth in Germany and the euro area, as leaders of the 27 EU nations gather for negotiations in Brussels.

Today we have a Spanish bond sale (€3.5 billion) maturing in 2015, 2017 and 2021 today.

The euro rose 0.23 percent to $1.2865 after earlier touching $1.2868, the highest since early November.

European politicians who are squabbling over Greece, the destiny of the euro, banking amalgamation and EU development need to reach agreement on a proposed $1.3 trillion package lasting until 2014.

The euro debt crisis and a deadlock over Greek aid raise the stakes for the talks, testing whether the bloc is heading for more integration.

Yesterday the Bank of England minutes were released revealing an 8-1 split on maintaining quantitative easing at £375 billion as David Miles sought an increase of £25 billion.

This comes in the wake of inflation being much higher than forecast than the targets that are set out by the BOE, for the next 2 years.

Eight members of the MPC decided that upholding the size of the asset purchase programme was appropriate.

Furthermore, the committee voted unanimously to keep its key lending rate at a record low 0.5%.

As for the rest of the day, we have the US Thanksgiving bank holiday so the headline calendar looks light.

Euro weakens as meeting for Greece ends in deadlock

Market sentiment was boosted yesterday evening as the Eurozone leaders gathered for the second time in a week to try and chalk out an agreement with the IMF in order to unlock bailout funds for Greece.Euro weakens as meeting for Greece ends in deadlockAt the European close yesterday, markets in Germany rose and the French market recovered somewhat marginally, after they were downgraded by Moody’s in anticipation of a deal being reached.

However, the meeting that stretched on into the early hours of this morning ended in a deadlock as the Eurogroup ministers failed to reach a decision and wrangle out a scheduled disbursement of funds.

The outcome of the euro leaders failing to do so has weakened the euro from 1.2825 levels, down to 1.2750.

There are reports that the leaders are considering allowing Athens to buy back up to €40 billion of its own bonds at a discount, to try and reduce their GDP figures to the 120% level within the next 8 years.

This muddled up, indecisive conclusion has brought back fears into the market that the eurozone crisis is not going away, and just prolonging the inevitable pain.

Martin Weale, of the Bank of England, issued a statement yesterday saying that inflation will continue to be much higher than estimated, for the next 2 years.

This has quashed any rumours of quantitative easing for the time being, as it would further aggravate inflation, which the UK economy can ill afford.

This morning, Sterling has been trading just above the 1.59 mark.

Any sort of clear direction from the 1.5850-1.59 range will come once we get some concrete information from Europe.

Meanwhile, in the US, Federal Reserve Chairman, Ben Bernanke issued a warning to markets stating that the US economy faces a substantial threat unless the government finds a way to avert the fiscal cliff due to kick off in January, as he admitted the Central Bank lacks the tools to avert it.

The greenback has strengthened largely due to safe-haven inflows as the Euro-zone crisis lingers on and a series of stronger than expected housing data releases out of the US, earlier in the week.

Construction of new homes in the US reached a 4-year high in October. We await employment figures later today from the US.

Wise money markets’ eyes on EU Greek meeting

News that France’s credit ratings was cut by Moody’s dampened the mood, before a meeting by Eurozone officials to resolve the fate of Greece’s €31.5 billion loan tranche.Wise money markets eyes on EU Greek meetingThe French downgrade may weigh on markets this morning but expectations of progress towards a resolution to the fiscal cliff will keep markets lifted.

News from the Eurozone will do little to help the euro given anticipated weak PMI and a further drop in the German IFO business confidence survey this week.

Finally we may see some encouraging news on the Greek front if the country’s loan tranche is permitted today.

However, any boost to euro sentiment will be short lived as negotiations about Greece’s sustainability and differences among its creditors dominate the limelight.

There was a switch in sentiment overnight as the prospect of a US Budget deal appeared to be on the cards.

Discussions between Obama and Congressional leaders have been ‘constructive’ suggesting some sign of a potential deal at some point before the deadline.

The switch was supported by positive housing news from the US as home builders’ confidence and existing home sales which both beat their forecasted figures.

Overnight and all eyes remained on the Bank of Japan meeting to see if it delivers on their promise to bring more easing over coming months.

There were no shocks from the BoJ but the Yen remains on the back foot in the wake of calls for “unlimited easing” by the opposition LDP party.

However, the outcome of elections is by no means clear cut and although the LDP will likely garner the lion’s share of the vote its policies may be constrained by coalition partners.