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| Version 1 | Version 2 |
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| Eurozone crisis live: Spain faces bond auction test | Eurozone crisis live: Spain faces bond auction test |
| (40 minutes later) | |
| 9.16am: Howard Archer of IHS Global Insight reckons that this morning's service sector data (see 9.03am) confirms that the eurozone economy shrank in the last three months. He writes: | |
| The region is still facing major headwinds, notably including increased fiscal tightening in many countries, markedly rising unemployment overall, and increased oil prices. | |
| And while Eurozone sovereign debt tensions have been eased by the European Central Bank's actions and a second bail out for Greece, the problems are far from resolved. Meanwhile, relatively muted global growth is currently capping export orders | |
| Bad news all round, then. | |
| If you add today's service data to other PMIs earlier this week, you get a combined PMI of 49.1, down from 49.3 in February. That indicates a deeper contraction in March (the further below 50 the PMI, the sharper the rate of contraction). | |
| 9.03am: The latest services data from across the euro area has just been released, and is slightly better than expected. But it probably won't be enought to keep the eurozone out of recession. | |
| The final Eurozone services PMI data for March came in at 49.2, which is slightly better than expected but still means that the sector contracted last month (anything below 50 = falling activity). | |
| Germany posted growth again, but at a four-month low, while France's service sector nudged a little higher. It was a darker picture in Italy and Spain, though, where service sector activity fell sharply. | |
| Here's a summary of March's service sector PMIs (which are based on interviews with purchasing managers across the region): | |
| Germany: 52.1 (down from 52.8 in February) France: 50.1 (up from 50.0 in February) Italy: 44.3 (up from 44.1 in February) Spain: 46.3 (up from 41.9 in February) | |
| 8.45am: John Redwood, the eurosceptic Tory MP, has opined on yesterday's shortlisted nominations for the Wolfson Economics Prize (which offers £250,000 for the best way to handle the break-up of the eurozone). | |
| While Redwood reckons the five shortlisted entries were all 'innovative', he believes there is no hope of European leaders preparing for the end of the single currency in its current form. | |
| Redwood writes: | |
| I detect no wish to plan an orderly exit for the most stressed countries today whilst the markets are temporarily calmed by the large injection of ECB money. I do not expect to wake up soon to negotiations over the creation of one or two new currencies with the complex Treaty changes that would require, nor for an emergency exit which they did not put in place in calmer times. No-one is clamouring for new currencies based on unscrambling an egg, with easter titles. Whilst an emergency exit is always a good idea in case a building catches fire, trying to knock one through when the fire has started might just fan the flames more quickly. | |
| Redwood also took a pop at the coverage given to young Jurre Herman, the Dutch boy who won €100 of vouchers for his proposal (and who is pictured on the front of The Times today). | |
| The media has decided to trivialise the whole topic by concentrating on a picture of a pizza drawn by a 10 year old. | |
| You can see Herman's entry here. | |
| 8.34am: Spanish goverment debt traded in the secondary bond market has come under a bit of pressure this morning, ahead of the bond auction due around 9.30am BST. | 8.34am: Spanish goverment debt traded in the secondary bond market has come under a bit of pressure this morning, ahead of the bond auction due around 9.30am BST. |
| That has pushed up the yield (the measure of the interest paid by the debt) on its five-year bonds by 13 basis points to 4.39%. That's the highest level since January 11th. | That has pushed up the yield (the measure of the interest paid by the debt) on its five-year bonds by 13 basis points to 4.39%. That's the highest level since January 11th. |
| The 10-year bond yield is also a little higher, above 5.5%. | The 10-year bond yield is also a little higher, above 5.5%. |
| Investors may be concerned by the news that Spain's debts will hit their highest level for two decades in 2012. | Investors may be concerned by the news that Spain's debts will hit their highest level for two decades in 2012. |
| As my colleague Katie Allen wrote last night: | As my colleague Katie Allen wrote last night: |
| Despite announcing its most austere budget for more than 30 years last week, Spain's government admitted on Tuesday that the debt-to-GDP ratio will jump to 79.8% in 2012 from 68.5% last year. | Despite announcing its most austere budget for more than 30 years last week, Spain's government admitted on Tuesday that the debt-to-GDP ratio will jump to 79.8% in 2012 from 68.5% last year. |
| Ministers put the rising ratio, which will still be below the European average, down to high interest payments, Spain's contribution to the Greek bailout and the cost of support for its own banks and regional authorities. | Ministers put the rising ratio, which will still be below the European average, down to high interest payments, Spain's contribution to the Greek bailout and the cost of support for its own banks and regional authorities. |
| 8.17am: As expected, shares have fallen in early trading in Europe. The German Dax dropped 0.8% at the open, with France's CAC down 0.5%. In the London, the FTSE 100 has lost 22 points, or 0.38%, to 5815. | 8.17am: As expected, shares have fallen in early trading in Europe. The German Dax dropped 0.8% at the open, with France's CAC down 0.5%. In the London, the FTSE 100 has lost 22 points, or 0.38%, to 5815. |
| The talk in the City is that traders are disappointed by last night's minutes from the Federal Reserve's most recent meeting. Just two of the 10 members of Fed's Open Market committee felt that the US economy was so fragile that it needed new stimulus methods. | The talk in the City is that traders are disappointed by last night's minutes from the Federal Reserve's most recent meeting. Just two of the 10 members of Fed's Open Market committee felt that the US economy was so fragile that it needed new stimulus methods. |
| That indicates that more quantitative easing (creating new electronic money to buy bonds) is off the agenda. Previous injections of QE have helped to drive shares higher, so some investors had hoped for another dose. | That indicates that more quantitative easing (creating new electronic money to buy bonds) is off the agenda. Previous injections of QE have helped to drive shares higher, so some investors had hoped for another dose. |
| On the other hand, of course, it's good news that most members of the FOMC think America's recovery is taking hold. But not | On the other hand, of course, it's good news that most members of the FOMC think America's recovery is taking hold. But not |
| As Gary Jenkins of Swordfish Research commented: | As Gary Jenkins of Swordfish Research commented: |
| What a strange world we live in when any hint of a pause in monetary easing is regarded as negative for risk assets, rather than as an indication that economic growth is making any further stimulus redundant | What a strange world we live in when any hint of a pause in monetary easing is regarded as negative for risk assets, rather than as an indication that economic growth is making any further stimulus redundant |
| The market still seems somewhat addicted to central bank assistance which makes me think that this crisis still has a long way to go. | The market still seems somewhat addicted to central bank assistance which makes me think that this crisis still has a long way to go. |
| And as reader jamesmitch points out in the comments below, the Fed has already mopped up an awful lot of US debt since the financial crisis began: | And as reader jamesmitch points out in the comments below, the Fed has already mopped up an awful lot of US debt since the financial crisis began: |
| Next time you read about the ECB bailing out some eurozone country; or about the Bank of England going for another round of Quantitative Easing, compare what you read with this number: total Fed holdings of US debt are now (4Q 2011) $10.45 trillion. | Next time you read about the ECB bailing out some eurozone country; or about the Bank of England going for another round of Quantitative Easing, compare what you read with this number: total Fed holdings of US debt are now (4Q 2011) $10.45 trillion. |
| 8.10am: This morning's German factory orders data for February (due at 10am BST) will show whether Europe's manufacturing powerhouse stumbled last month as the eurozone slid towards recession. | 8.10am: This morning's German factory orders data for February (due at 10am BST) will show whether Europe's manufacturing powerhouse stumbled last month as the eurozone slid towards recession. |
| A month ago, data for January was surprisingly bad, with German factory orders unexpectedly declining due to falling demand from overseas for 'big-ticket' items such such as machinery. | A month ago, data for January was surprisingly bad, with German factory orders unexpectedly declining due to falling demand from overseas for 'big-ticket' items such such as machinery. |
| Jeremy Cook, chief economist at World First, reckons the German factory orders could actually be more important than the European Central Bank's meeting: | Jeremy Cook, chief economist at World First, reckons the German factory orders could actually be more important than the European Central Bank's meeting: |
| Personally think that GER Factory Orders will be a more interesting watch than the ECB today... | Personally think that GER Factory Orders will be a more interesting watch than the ECB today... |
| — World First (@World_First) April 4, 2012 | — World First (@World_First) April 4, 2012 |
| 7.57am: There's plenty of economic data to keep up busy this morning, as well as the Spanish bond auction and the ECB meeting. | 7.57am: There's plenty of economic data to keep up busy this morning, as well as the Spanish bond auction and the ECB meeting. |
| Here's today's agenda: | Here's today's agenda: |
| • Auction of Spanish bonds maturing in 2015, 2016 and 2020: from 9.30am BST / 10.30am CET • Eurozone service sector PMI for March: 9am BST / 10am CET • UK services sector PMI for March: 9.30am BST • Eurozone retail sales data: 10am BST / 11am CET • German factory orders in February: 11am BST / noon CET • European Central Bank decision on monetary policy: 12.45pm BST / 1.45pm CET • European Central Bank press conference: 1.30pm BST / 2.30pm CET • US ISM non-manufacturing data for March: 3pm BST / 10am EST | • Auction of Spanish bonds maturing in 2015, 2016 and 2020: from 9.30am BST / 10.30am CET • Eurozone service sector PMI for March: 9am BST / 10am CET • UK services sector PMI for March: 9.30am BST • Eurozone retail sales data: 10am BST / 11am CET • German factory orders in February: 11am BST / noon CET • European Central Bank decision on monetary policy: 12.45pm BST / 1.45pm CET • European Central Bank press conference: 1.30pm BST / 2.30pm CET • US ISM non-manufacturing data for March: 3pm BST / 10am EST |
| 7.50am: Good morning, and welcome back to our rolling coverage of the eurozone debt crisis. | 7.50am: Good morning, and welcome back to our rolling coverage of the eurozone debt crisis. |
| It should be quite a busy day. Coming up: Spain faces an early test of its new austerity budget when it attempts to sell €3.5bn of government bonds. This morning's auction should show whether Madrid retains the support of the financial markets – after admitting yesterday that its debts will rise sharply to a 20-year high in 2012.. Last week's general strike is still fresh in the memory. | It should be quite a busy day. Coming up: Spain faces an early test of its new austerity budget when it attempts to sell €3.5bn of government bonds. This morning's auction should show whether Madrid retains the support of the financial markets – after admitting yesterday that its debts will rise sharply to a 20-year high in 2012.. Last week's general strike is still fresh in the memory. |
| Also, the European Central Bank is holding its monthly meeting to set monetary policy – a chance to hear Mario Draghi's views on the current situation. The ECB is not expected to bow to pressure to begin unwinding its loose monetary policy, and should also leave interest rates unchanged. | Also, the European Central Bank is holding its monthly meeting to set monetary policy – a chance to hear Mario Draghi's views on the current situation. The ECB is not expected to bow to pressure to begin unwinding its loose monetary policy, and should also leave interest rates unchanged. |
| A rush of economic statistics this morning will show how Europe's services sector fared last month, following Monday's gloomy manufacturing data. | A rush of economic statistics this morning will show how Europe's services sector fared last month, following Monday's gloomy manufacturing data. |
| And in the financial markets, traders expect shares to fall, after the minutes of the Federal Reserve's last meeting (released last night), suggested that the Fed was unlikely to conduct more efforts to stimulate the US economy soon. | And in the financial markets, traders expect shares to fall, after the minutes of the Federal Reserve's last meeting (released last night), suggested that the Fed was unlikely to conduct more efforts to stimulate the US economy soon. |