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| Greece passes austerity measures, as markets recover from Trump slump - business live | Greece passes austerity measures, as markets recover from Trump slump - business live |
| (about 1 hour later) | |
| 10.04am BST | |
| 10:04 | |
| Here’s a downbeat assessment of Greece and the eurozone from Swissquote Bank’s Yann Quelenn, despite the country’s parliament approving the latest austerity measures: | |
| It has been a while since Greece was at the top of the market news. We consider this is as a key issue for the European Union so we are still monitoring the country. It is now back into recession (printing two consecutive growth negative quarters) despite the massive austerity policies over the last few years | |
| Pension cuts or the increase in taxes do not seem to be sufficient and the cost of servicing the debt is way too massive so we do not see any positive issue on that. Greece cannot devalue its currency and so it is then forced to devalue internally, for instance its public aid (pensions in particular). | |
| Since February 2015, Greece has repaid €35.4 billion and by the end of 2018 Greece must repay €28 billion (including €2.7 billion of interest). To put that into perspective, the 2016 nominal GDP was €176 billion. The economy must then expand by at least more than 1.5% next year. And next year repayments are less than half of what Greece will need to pay in 2019. | |
| We don’t see how Greece will be able to reimburse this debt as it is clear that the country won’t be able to print a growth above the cost of servicing its debt. | |
| In the short-term, everything looks decent on the single currency side but what will happen when Portugal or Spain have issues as deep as Greece. Uncertainties are far from over on the euro side. | |
| 9.50am BST | |
| 09:50 | |
| Good news - mainly - for Portugal. | |
| Moody’s has kept the country’s credit rating at Ba1 with a stable outlook in its annual analysis. This reflects Portugal’s economic recovery and stronger labour market, countered with its very high government debt. | |
| Evan Wohlmann, a Moody’s vice president and co-author of the report, said: | |
| Portugal’s credit profile is supported by the economic recovery, its return to private capital markets, the economy’s diversification and relatively high average wealth levels. Portugal’s key credit constraint relates to its very high government debt. Although we expect debt to start declining as a share of GDP this year, any debt reduction will only be gradual. | |
| Moody’s highlights: | |
| Portugal’s gross public debt ratio remains one of the highest in the EU and the highest in the Ba1 space. | |
| Debt-to-GDP ratio will gradually decline, supported by an average primary surplus of 2.3% over the next two years and a moderate nominal GDP growth, but will still remain around 125% of GDP in 2020. | |
| After improving to 1.8% of GDP in 2017, Portugal’s general government deficit will deteriorate slightly in 2018 to 2.0% of GDP, compared to a deficit of 1.0% next year forecast by the Portuguese authorities given the rating agency’s assumption of more moderate growth and a stronger increase in expenditure. However, the deficit will remain below the 3% Maastricht threshold set by the European Commission. | |
| We expect Portugal’s economic recovery to continue, with an increase in GDP growth to 1.7% in 2017, before moderating to 1.4% in 2018. | |
| 9.38am BST | |
| 09:38 | |
| Over in Greece, the Athens market has greeted the news of the austerity vote positively. It is currently up 0.67% at 787.53. | |
| 9.32am BST | |
| 09:32 | |
| Oil boosted by production cut hopes | |
| Oil prices are rising ahead of a meeting of Opec producers next week, as hopes grow that a production cut agreed in November could be extended by nine months to March 2018. | |
| Both Saudi Arabia and Russia, key producers, recently suggested such an extension was possible, pledging to do “whatever it takes” to tackle a supply glut. Even though US shale producers are taking up some of the slack from output cuts elsewhere, the prospect of such an extension is supporting crude prices. | |
| Brent is currently up 1.2% at $53.16 a barrel while West Texas Intermediate - the US benchmark - is up a similar amount at around $50. Ipek Ozkardeskaya, senior market analyst at London Capital Group, said: | |
| Markets currently price in a nine-month extension in OPEC/Russia production cuts and the $50 level has been a reasonable target for those who took the oil recovery bet. [An] additional rise toward the $53/$55 is expected to be bumpier as it would certainly require deeper output cuts and/or any positive surprise at the May 25 meeting. | |
| 8.21am BST | 8.21am BST |
| 08:21 | 08:21 |
| As the markets end the week on a slightly more positive note, David Morrison, senior market strategist at Spreadco, said: | As the markets end the week on a slightly more positive note, David Morrison, senior market strategist at Spreadco, said: |
| There’s a general feeling of relief that the US-led sell-off didn’t accelerate last night. Instead, all the major US stock indices managed to post modest gains despite earlier weakness. It may be too soon to sound the all-clear but so far investors are doing exactly what they’ve done for the past eight years: using any significant pull-back in equity markets as a buying opportunity. | There’s a general feeling of relief that the US-led sell-off didn’t accelerate last night. Instead, all the major US stock indices managed to post modest gains despite earlier weakness. It may be too soon to sound the all-clear but so far investors are doing exactly what they’ve done for the past eight years: using any significant pull-back in equity markets as a buying opportunity. |
| But what will be of interest is to see if this bounce-back has the strength and conviction to push the indices back up towards or beyond recent record highs. Most of the trading gaps which formed after the first round of the French presidential election have now been filled. | But what will be of interest is to see if this bounce-back has the strength and conviction to push the indices back up towards or beyond recent record highs. Most of the trading gaps which formed after the first round of the French presidential election have now been filled. |
| So technically there’s every chance of a resumption of a US-led stock market rally. In the near-term much depends on what comes out of Washington. But for now most investors will be happy to go into the weekend with another positive session for the major indices. | So technically there’s every chance of a resumption of a US-led stock market rally. In the near-term much depends on what comes out of Washington. But for now most investors will be happy to go into the weekend with another positive session for the major indices. |
| Updated | Updated |
| at 8.22am BST | at 8.22am BST |
| 8.14am BST | 8.14am BST |
| 08:14 | 08:14 |
| European markets move ahead in early trading | European markets move ahead in early trading |
| With the overnight recovery on Wall Street after Wednesday’s slump and a relatively positive performance in Asia - the Nikkei 225 ended up 0.19% - European markets are also making a positive start to trading. | With the overnight recovery on Wall Street after Wednesday’s slump and a relatively positive performance in Asia - the Nikkei 225 ended up 0.19% - European markets are also making a positive start to trading. |
| The FTSE 100 is up 24 points or 0.33% although pharmaceutical group Hikma is down 6% after cutting its revenue forecasts following a delay to a US drug launch. This takes its total fall this week to 10% so far. | The FTSE 100 is up 24 points or 0.33% although pharmaceutical group Hikma is down 6% after cutting its revenue forecasts following a delay to a US drug launch. This takes its total fall this week to 10% so far. |
| Elsewhere Germany’s Dax opened up 0.1% while France’s Cac climbed 0.2%. | Elsewhere Germany’s Dax opened up 0.1% while France’s Cac climbed 0.2%. |
| Updated | Updated |
| at 8.23am BST | at 8.23am BST |
| 8.06am BST | 8.06am BST |
| 08:06 | 08:06 |
| Pound edges higher but remains below $1.30 | Pound edges higher but remains below $1.30 |
| The pound rose above $1.30 on Thursday for the first time since September, but it did not manage to hold that level. Konstantinos Anthis at ADS Securities said: | The pound rose above $1.30 on Thursday for the first time since September, but it did not manage to hold that level. Konstantinos Anthis at ADS Securities said: |
| The pound has had a turbulent 24 hours. A rally through the 1.3000 level yesterday took it to 1.3050 but a few hours later it collapsed to 1.2900 and ended the day around 50 pips higher. The mini flash crash was not related to any particular data set, so the drop was probably down to a combinations of factors. Sterling has risen around 7.5% in value over the past 30 days so the drop may have been traders taking money off the table, or it could have been down to the launch of the Conservative manifesto and the words of Theresa May. | The pound has had a turbulent 24 hours. A rally through the 1.3000 level yesterday took it to 1.3050 but a few hours later it collapsed to 1.2900 and ended the day around 50 pips higher. The mini flash crash was not related to any particular data set, so the drop was probably down to a combinations of factors. Sterling has risen around 7.5% in value over the past 30 days so the drop may have been traders taking money off the table, or it could have been down to the launch of the Conservative manifesto and the words of Theresa May. |
| It is currently up 0.12% at $1.2953, while against the euro it is down 0.09% at €1.1641. | It is currently up 0.12% at $1.2953, while against the euro it is down 0.09% at €1.1641. |
| Speaking of the manifesto, Citigroup analysts said it showed that the Conservatives showed no signs of moving to a “Singapore-upon-Thames’ model of a deregulated, low tax economy. | Speaking of the manifesto, Citigroup analysts said it showed that the Conservatives showed no signs of moving to a “Singapore-upon-Thames’ model of a deregulated, low tax economy. |
| The bank said her bet on an early election should pay off, but rather hedged its bets in terms of a possible Tory majority, saying it could be anything between 104 and 190 seats. | The bank said her bet on an early election should pay off, but rather hedged its bets in terms of a possible Tory majority, saying it could be anything between 104 and 190 seats. |
| 7.42am BST | 7.42am BST |
| 07:42 | 07:42 |
| Agenda: Greek MPs back more austerity, markets set to recover | Agenda: Greek MPs back more austerity, markets set to recover |
| Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Greece’s parliament has agreed to the latest austerity measures demanded by its creditors to unlock the next tranche of financial aid. | Greece’s parliament has agreed to the latest austerity measures demanded by its creditors to unlock the next tranche of financial aid. |
| But the proposed cuts to pensions and tax hikes drew angry protestors outside parliament as the vote took place. Some hurled petrol bombs and firecrackers at police, who in turn released tear gas. | But the proposed cuts to pensions and tax hikes drew angry protestors outside parliament as the vote took place. Some hurled petrol bombs and firecrackers at police, who in turn released tear gas. |
| Now the measures have been approved, the left-led Syriza government now hopes that European finance ministers will agree at a meeting on Monday to release €7.5bn of bailout funds, as well as looking at granting debt relief which will allow the International Monetary Fund to participate in the bailout. More immediately, it needs cash to repay a tranche of debt which is due in July. | Now the measures have been approved, the left-led Syriza government now hopes that European finance ministers will agree at a meeting on Monday to release €7.5bn of bailout funds, as well as looking at granting debt relief which will allow the International Monetary Fund to participate in the bailout. More immediately, it needs cash to repay a tranche of debt which is due in July. |
| Prime minister Alexis Tsipras said (quote from Reuters): | Prime minister Alexis Tsipras said (quote from Reuters): |
| We deserve and we expect from Monday’s eurogroup a decision regulating debt relief which will correspond to the sacrifices of the Greek people. | We deserve and we expect from Monday’s eurogroup a decision regulating debt relief which will correspond to the sacrifices of the Greek people. |
| The country is still struggling, however, after seven years of crisis, with figures earlier this week showing it had gone back into recession. | The country is still struggling, however, after seven years of crisis, with figures earlier this week showing it had gone back into recession. |
| Here is the agenda for Monday’s meeting as regards Greece: | Here is the agenda for Monday’s meeting as regards Greece: |
| The Eurogroup will be informed about the preliminary agreement reached on 2 May between Greece and the institutions (the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund) on a new set of policy reforms in the context of Greece’s economic adjustment programme, financed by the European Stability Mechanism. | The Eurogroup will be informed about the preliminary agreement reached on 2 May between Greece and the institutions (the European Commission, the European Central Bank, the European Stability Mechanism and the International Monetary Fund) on a new set of policy reforms in the context of Greece’s economic adjustment programme, financed by the European Stability Mechanism. |
| The agreement is one of the steps towards completing the ongoing second review of the programme and paving the way for the next disbursement of financial assistance to Greece by the European Stability Mechanism. | The agreement is one of the steps towards completing the ongoing second review of the programme and paving the way for the next disbursement of financial assistance to Greece by the European Stability Mechanism. |
| The Eurogroup will also discuss Greece’s medium-term (from 2018 onwards) fiscal targets and the issues related to the sustainability of the country’s public debt. | The Eurogroup will also discuss Greece’s medium-term (from 2018 onwards) fiscal targets and the issues related to the sustainability of the country’s public debt. |
| Elsewhere, after Wednesday’s plunge on Wall Street following the latest accusations against President Trump, US shares managed to regain some ground, with the Dow Jones Industrial Average up 0.2%. The recovery was too late to help European markets however, which ended the day in the red. Analysts expect a more positive start to trading today. | Elsewhere, after Wednesday’s plunge on Wall Street following the latest accusations against President Trump, US shares managed to regain some ground, with the Dow Jones Industrial Average up 0.2%. The recovery was too late to help European markets however, which ended the day in the red. Analysts expect a more positive start to trading today. |
| Our European opening calls:$FTSE 7462 +0.34%$DAX 12607 +0.13%$CAC 5301 +0.21%$IBEX 10705 +0.19%$MIB 21341 +0.20% | Our European opening calls:$FTSE 7462 +0.34%$DAX 12607 +0.13%$CAC 5301 +0.21%$IBEX 10705 +0.19%$MIB 21341 +0.20% |
| But David Madden, market analyst at CMC Markets UK said there was still a fairly large amount of fear in the markets: | But David Madden, market analyst at CMC Markets UK said there was still a fairly large amount of fear in the markets: |
| Buying the dip works well when the economic and political outlook appears to be positive, but given the uncertainty that surrounds Donald Trump you can see why we have only seen a small drop in the VIX. The scandal in Washington DC hasn’t gone away and neither has trader’s nerves. Going long too soon could prove to be costly. | Buying the dip works well when the economic and political outlook appears to be positive, but given the uncertainty that surrounds Donald Trump you can see why we have only seen a small drop in the VIX. The scandal in Washington DC hasn’t gone away and neither has trader’s nerves. Going long too soon could prove to be costly. |
| A political scandal of this scale is going to stay hanging over Mr Trump for some time, and even if nothing comes of it in the end, it’s going to be a long and drawn out process. Having this story lingering away will be enough to unsettle traders. | A political scandal of this scale is going to stay hanging over Mr Trump for some time, and even if nothing comes of it in the end, it’s going to be a long and drawn out process. Having this story lingering away will be enough to unsettle traders. |
| As befits a Friday, as thoughts turn towards the weekend, the agenda is looking a little thin, but the CBI is due to release its latest industrial trends survey later this morning. | As befits a Friday, as thoughts turn towards the weekend, the agenda is looking a little thin, but the CBI is due to release its latest industrial trends survey later this morning. |