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| Eurozone crisis live: Spain gets auction away after Japan pledges $60bn to IMF | Eurozone crisis live: Spain gets auction away after Japan pledges $60bn to IMF |
| (40 minutes later) | |
| 11.57am: Argentina's decision to nationalise YPF, majority owned by Spain's Repsol, last night is turning into a major political row. | |
| Spanish industry minister Jose Manuel Soria pledged this morning to retaliate against Argentina, saying: | |
| With this attitude, this hostility from the Argentine authorities, there will be consequences that we'll see over the next few days. They will be in the diplomatic field, the industrial field, and on energy. | |
| EC president Jose Manuel Barroso also weighed in this morning, saying he was "seriously disappointed) by the move, while Repsol itself is demanding $18bn of compensation for its stake in YPF. | |
| Although Spain isn't a member of the G20, the argument could overshadow the meeting of the world's 20 major economies in Washington later this week. It has certainly rattled in Repsol (shares down 6% right now). As Stuart Joyner of Investec commented: | |
| The Argentine Tango is the consummate dance of love, but there was little affection for the country's largest foreign investor in Buenos Aires yesterday. | |
| The Daily Telegraph's Alistair Osborne has also rebuked Argentina's president Cristina Fernández for the decision to seize YPF, warning that the "smash'n'grab" raid could scare off other Western companies. | |
| 11.45am: Ratings agency Fitch has reaffirmed Austria's AAA rating with a stable outlook, despite the eurozone crisis. | |
| Fitch said that Austria had recovered rapidly from the recession of 2008-09, partly thanks to the strong performance of neighbour Germany. But it also warned that the country was "not immune" to systemic risks, adding that only a "sustainable economic recovery across the eurozone" would end of the crisis. | Fitch said that Austria had recovered rapidly from the recession of 2008-09, partly thanks to the strong performance of neighbour Germany. But it also warned that the country was "not immune" to systemic risks, adding that only a "sustainable economic recovery across the eurozone" would end of the crisis. |
| Austria lost its AAA rating with Standard & Poor's in January (on the night when France was also downgraded). | Austria lost its AAA rating with Standard & Poor's in January (on the night when France was also downgraded). |
| 11.10am: Conservative MP Douglas Carswell has blasted the Bank of England following the news that UK inflation rose last month. | 11.10am: Conservative MP Douglas Carswell has blasted the Bank of England following the news that UK inflation rose last month. |
| In a blogpost titled "The Bank of England has made a mess of monetary policy", Carswell rails against Threadneedle Street's failure to rein inflation in. He points out that MPC member Adam Posen predicted a year ago that CPI would be below 1.5% by this summer: | In a blogpost titled "The Bank of England has made a mess of monetary policy", Carswell rails against Threadneedle Street's failure to rein inflation in. He points out that MPC member Adam Posen predicted a year ago that CPI would be below 1.5% by this summer: |
| When Posen made his forecast, he was quoted in the Guardian as saying that: "If I have made the wrong call .... I would not pursue a second term. They should have somebody who gets it right and not me." | When Posen made his forecast, he was quoted in the Guardian as saying that: "If I have made the wrong call .... I would not pursue a second term. They should have somebody who gets it right and not me." |
| I admire such frankness and Mr Posen's willingness to be held accountable. But why just Posen? The Bank of England should, as Mr Posen says, have people who get it right. | I admire such frankness and Mr Posen's willingness to be held accountable. But why just Posen? The Bank of England should, as Mr Posen says, have people who get it right. |
| ... Since the consequences of their own monetary mismanagement came home to roost, the MPC has overseen a massive monetary stimulus – which has notably failed to produce any growth. | ... Since the consequences of their own monetary mismanagement came home to roost, the MPC has overseen a massive monetary stimulus – which has notably failed to produce any growth. |
| Quit bashing the investment bankers. When do we get to hold the central bankers to account? | Quit bashing the investment bankers. When do we get to hold the central bankers to account? |
| As I understand it, Posen's fears were based on the fact he was (at the time) a lone voice calling for more quantitative easing. The rest of the MPC eventually agreed with him. And you could argue that high commodity costs have made it very hard for the Bank of England to have much effect on the inflation. And without QE, the UK would probably have posted even less economic growth. | As I understand it, Posen's fears were based on the fact he was (at the time) a lone voice calling for more quantitative easing. The rest of the MPC eventually agreed with him. And you could argue that high commodity costs have made it very hard for the Bank of England to have much effect on the inflation. And without QE, the UK would probably have posted even less economic growth. |
| But Carswell does raise a very interesting issue -- when, if ever, do central bankers pay the price for their mistakes? I"m reminded of Montagu Norman, the governor of the Bank of England before, during, and after the Great Depression. He ended his days as Baron Norman, despite being blamed for some of the mistakes that crashed the world economy (Winston Churchill once privately suggested that the governor should be hanged for his misdeeds). | But Carswell does raise a very interesting issue -- when, if ever, do central bankers pay the price for their mistakes? I"m reminded of Montagu Norman, the governor of the Bank of England before, during, and after the Great Depression. He ended his days as Baron Norman, despite being blamed for some of the mistakes that crashed the world economy (Winston Churchill once privately suggested that the governor should be hanged for his misdeeds). |
| The excellent Lords of Finance has more info on Norman and his fellow central bankers (extract here) | The excellent Lords of Finance has more info on Norman and his fellow central bankers (extract here) |
| 10.36am: David Tweed of Bloomberg's verdict on the Spanish debt auction (see 9.40am) feels spot-on -- moderately successful, if you're an optimist. | 10.36am: David Tweed of Bloomberg's verdict on the Spanish debt auction (see 9.40am) feels spot-on -- moderately successful, if you're an optimist. |
| #Spain maintains market access with bill sale, even with higher yields -- sale moderately successful if you like your glass half full. BBVA | #Spain maintains market access with bill sale, even with higher yields -- sale moderately successful if you like your glass half full. BBVA |
| — David Tweed (@DavidTweed) April 17, 2012 | — David Tweed (@DavidTweed) April 17, 2012 |
| The bigger test comes on Thursday, at the auction of longer-term Spanish bonds. | The bigger test comes on Thursday, at the auction of longer-term Spanish bonds. |
| 10.26am: Another encouraging development -- Greece just successfully sold €1.625bn of three-month bonds at an average yield of 4.2% (compared with 4.25% at the last auction of this kind). | 10.26am: Another encouraging development -- Greece just successfully sold €1.625bn of three-month bonds at an average yield of 4.2% (compared with 4.25% at the last auction of this kind). |
| 10.13am: The euro has hit a new high for the day against the US dollar ($1.3172) after German business confidence rose unexpectedly. | 10.13am: The euro has hit a new high for the day against the US dollar ($1.3172) after German business confidence rose unexpectedly. |
| The ZEW Institute's monthly survey (a closely watched measure of sentiment in the EU's largest economy), rose to 23.4 from 22.3 (defying expectations that it would fall). | The ZEW Institute's monthly survey (a closely watched measure of sentiment in the EU's largest economy), rose to 23.4 from 22.3 (defying expectations that it would fall). |
| The business leaders interviewed by ZEW reckoned that economic conditions had stabilised, with most predicting 'further positive developments' in the next six months. Many were also bracing for higher inflation. | The business leaders interviewed by ZEW reckoned that economic conditions had stabilised, with most predicting 'further positive developments' in the next six months. Many were also bracing for higher inflation. |
| Several downside risks were cited - including the danger of an economic slowdown in Germany's trading partners; elevated oil prices; and the general debt crisis. | Several downside risks were cited - including the danger of an economic slowdown in Germany's trading partners; elevated oil prices; and the general debt crisis. |
| 10.01am: Eurozone inflation data has just been released, showing that the consumer prices index was 2.7% in March, up from an initial estimate of 2.6% (so unchanged from February). | 10.01am: Eurozone inflation data has just been released, showing that the consumer prices index was 2.7% in March, up from an initial estimate of 2.6% (so unchanged from February). |
| 9.52am: In the bond market, Spanish sovereign debt is strengthening in value after this morning's bond auction (see 9.40am for the details). That's pushed the yield on the 10-year bond further below 6%. | 9.52am: In the bond market, Spanish sovereign debt is strengthening in value after this morning's bond auction (see 9.40am for the details). That's pushed the yield on the 10-year bond further below 6%. |
| 9.40am: The results of Spain's debt auction are out -- borrowing costs have almost doubled, but it has managed to sell slightly more debt than it was aiming for. | 9.40am: The results of Spain's debt auction are out -- borrowing costs have almost doubled, but it has managed to sell slightly more debt than it was aiming for. |
| Spain just reported that it sold €2.09bn of 12-month bills at an average yield (the interest rate which investors will receive) of 2.623%, up from 1.418% at the previous auction of this type -- just one month ago. | Spain just reported that it sold €2.09bn of 12-month bills at an average yield (the interest rate which investors will receive) of 2.623%, up from 1.418% at the previous auction of this type -- just one month ago. |
| It also sold €1.09bn of 18-month bonds, at an average rate of 3.11%, up from 1.711% in mid-March. | It also sold €1.09bn of 18-month bonds, at an average rate of 3.11%, up from 1.711% in mid-March. |
| The bid-to-cover ratio (a measure of demand) also rose for both bond types, showing there was plenty of interest in the auction. | The bid-to-cover ratio (a measure of demand) also rose for both bond types, showing there was plenty of interest in the auction. |
| So, technically a successful auction (Spain was aiming to sell between €2bn and €3bn of bonds), but a sign that investors demand much higher returns in return for holding Spanish debt. | So, technically a successful auction (Spain was aiming to sell between €2bn and €3bn of bonds), but a sign that investors demand much higher returns in return for holding Spanish debt. |
| 9.32am: The latest UK inflation data is out, and it shows that the rising cost of living accelerated last month. | 9.32am: The latest UK inflation data is out, and it shows that the rising cost of living accelerated last month. |
| The consumer prices index (CPI) rose to 3.5% year-on-year in March (from 3.4% last month). The Office for National Statistics said the biggest upward pressure on inflation came from higher food and clothing costs. | The consumer prices index (CPI) rose to 3.5% year-on-year in March (from 3.4% last month). The Office for National Statistics said the biggest upward pressure on inflation came from higher food and clothing costs. |
| The increase in CPI was in line with analyst forcasts, and brings inflation further away from the Bank of England's 2% target. | The increase in CPI was in line with analyst forcasts, and brings inflation further away from the Bank of England's 2% target. |
| The retail prices index came in at 3.6%, down from 3.7% last month. | The retail prices index came in at 3.6%, down from 3.7% last month. |
| 9.00am: Nicolas Sarkozy has repeated his call for the European Central Bank to be given more responsibility for economic growth across the eurozone. | 9.00am: Nicolas Sarkozy has repeated his call for the European Central Bank to be given more responsibility for economic growth across the eurozone. |
| Speaking on French radio station Inter, president Sarkozy insisted that Europe should disuss the ECB's role -- despite Germany's deep reluctance for such a debate. However, he also argued that such a move could come without EU treaties being renegotiated. | Speaking on French radio station Inter, president Sarkozy insisted that Europe should disuss the ECB's role -- despite Germany's deep reluctance for such a debate. However, he also argued that such a move could come without EU treaties being renegotiated. |
| Here's the key quotes (via Reuters): | Here's the key quotes (via Reuters): |
| It is not possible that the ECB does not participate in suporting growth, like all the central banks in the world... It is wrong to say that just because the ECB is independent, we do not have the right to talk. | It is not possible that the ECB does not participate in suporting growth, like all the central banks in the world... It is wrong to say that just because the ECB is independent, we do not have the right to talk. |
| Sarkozy first called for the ECB's mandate to be changed last weekend. The euro crisis is a key issus in the French presidential election. The first round of voting takes place this weekend, and the latest polling puts Sarkozy level with Francois Hollande. | Sarkozy first called for the ECB's mandate to be changed last weekend. The euro crisis is a key issus in the French presidential election. The first round of voting takes place this weekend, and the latest polling puts Sarkozy level with Francois Hollande. |
| 8.46am: In the bond markets, Spanish and Italian debt has strengthened slightly ahead of Spain's bond auction (results due in around an hour). | 8.46am: In the bond markets, Spanish and Italian debt has strengthened slightly ahead of Spain's bond auction (results due in around an hour). |
| This has pushed the yield on Spain's 10-year bonds back down below 6% – suggesting traders are a little less nervous about the crisis. That follows reports last night that the Spanish government could take direct control of the finances of at least one of its regions soon. | This has pushed the yield on Spain's 10-year bonds back down below 6% – suggesting traders are a little less nervous about the crisis. That follows reports last night that the Spanish government could take direct control of the finances of at least one of its regions soon. |
| 8.22am: As WienVanRock points out in the comments below, there is an irony in Japan providing $60bn in new loans to address the European debt crisis, when it is already deeply indebted itself. | 8.22am: As WienVanRock points out in the comments below, there is an irony in Japan providing $60bn in new loans to address the European debt crisis, when it is already deeply indebted itself. |
| At $10trillion and rising, Japan's national debt is already around twice its GDP. And unlike several European countries, it no longer boasts a triple-A credit rating (last August, Moody's cut it to Aa3, the fourth highestr rating). | At $10trillion and rising, Japan's national debt is already around twice its GDP. And unlike several European countries, it no longer boasts a triple-A credit rating (last August, Moody's cut it to Aa3, the fourth highestr rating). |
| With most Japanese debt bought by its own companies and funds, the credit rating isn't a major issue. But the recent rise in the cost of insuring Japanese debt against default suggests some investors are concerned about its long-term prospects. | With most Japanese debt bought by its own companies and funds, the credit rating isn't a major issue. But the recent rise in the cost of insuring Japanese debt against default suggests some investors are concerned about its long-term prospects. |
| As WienVanRock puts it: | As WienVanRock puts it: |
We are heading from one big financial crisis into another soon enough. Japan is sitting on a pile of trouble just simmering like a mad volcano. | We are heading from one big financial crisis into another soon enough. Japan is sitting on a pile of trouble just simmering like a mad volcano. |
| 8.21am: The Spanish stock market hit a new three-year low at the start of trading, before rebounding. | 8.21am: The Spanish stock market hit a new three-year low at the start of trading, before rebounding. |
| The IBEX 35 fell 70 points at the start of the session to 7136, its lowest level since 12 March 2009, but then shifted into positive territory. | The IBEX 35 fell 70 points at the start of the session to 7136, its lowest level since 12 March 2009, but then shifted into positive territory. |
| Shares in Spanish oil and gas company Repsol tumbled by 8%, following the news last night that its Argentinian division, YPF, could be nationalised by the Buenos Aires government. | Shares in Spanish oil and gas company Repsol tumbled by 8%, following the news last night that its Argentinian division, YPF, could be nationalised by the Buenos Aires government. |
| In the City, though, the FTSE 100 is up 8 points at 5673, while the German DAX and French CAC both gained around 0.3%. | In the City, though, the FTSE 100 is up 8 points at 5673, while the German DAX and French CAC both gained around 0.3%. |
| 7.59am: Here's today's agenda: | 7.59am: Here's today's agenda: |
| • Spain auctions €3bn of 12 and 18 month debt - from 9.30am BST / 10.30am CET • UK inflation price for March - 9.30am BST • Eurozone inflation data for March - 10am BST / 11am CET • German ZEW survey of economic sentiment - 10am BST / 11am CET • IMF releases latest World Economic Outlook - 2pm BST / 9am EST • IMF releases latest Fiscal Monitor Report - 4pm BST / 11am EST | • Spain auctions €3bn of 12 and 18 month debt - from 9.30am BST / 10.30am CET • UK inflation price for March - 9.30am BST • Eurozone inflation data for March - 10am BST / 11am CET • German ZEW survey of economic sentiment - 10am BST / 11am CET • IMF releases latest World Economic Outlook - 2pm BST / 9am EST • IMF releases latest Fiscal Monitor Report - 4pm BST / 11am EST |
| 7.53am: Japan's move has been welcomed in the financial markets, where the euro is currently trading around the $1.31 mark (having briefly fallen below $1.30 yesterday). | 7.53am: Japan's move has been welcomed in the financial markets, where the euro is currently trading around the $1.31 mark (having briefly fallen below $1.30 yesterday). |
| Elisabeth Afseth of Investec says it is clearly good news, and is also encouraged by the suggestion (see 7.36am) that China could follow suit. | Elisabeth Afseth of Investec says it is clearly good news, and is also encouraged by the suggestion (see 7.36am) that China could follow suit. |
| Afseth said: | Afseth said: |
Japan's early commitment may accelerate other G20 countries decisions, though the US is unlikely to change its mind. And Europe can do with a stronger firewall. Spanish yields widened again yesterday, the 10 year was 8bps wider and at 6.04% closed above the psychologically important 6% level for the first time in 4 months. The 5 year CDS spread closed at a record high of 510bps. | Japan's early commitment may accelerate other G20 countries decisions, though the US is unlikely to change its mind. And Europe can do with a stronger firewall. Spanish yields widened again yesterday, the 10 year was 8bps wider and at 6.04% closed above the psychologically important 6% level for the first time in 4 months. The 5 year CDS spread closed at a record high of 510bps. |
| 7.36am: Japanese finance minister Jun Azumi has also hinted that China might provide more support for the IMF. According to Reuters, Azumi told the press conference in Tokyo that he had consulted with Chinese vice premier Wang Qishan yesterday, and found "no gap" between the two countries on IMF funding. | 7.36am: Japanese finance minister Jun Azumi has also hinted that China might provide more support for the IMF. According to Reuters, Azumi told the press conference in Tokyo that he had consulted with Chinese vice premier Wang Qishan yesterday, and found "no gap" between the two countries on IMF funding. |
| China is understood to want more influence within the IMF in return for extra funding (under the current quote scheme, China only has 3.81% of total voting power) | China is understood to want more influence within the IMF in return for extra funding (under the current quote scheme, China only has 3.81% of total voting power) |
| 7.24am: Christine Lagarde, the IMF's managing director, says she warmly welcomes Japan's promise of $60bn in new loans for its euro crisis firewall (see 7.08am). | 7.24am: Christine Lagarde, the IMF's managing director, says she warmly welcomes Japan's promise of $60bn in new loans for its euro crisis firewall (see 7.08am). |
| Lagarde describing the pledge as an "important step forward" that would promote global economic stability, adding: | Lagarde describing the pledge as an "important step forward" that would promote global economic stability, adding: |
| Japan has a longstanding record of helping others, and of supporting the IMF in its core mission of helping to support economic stability in all its member countries. I am grateful for Japan's leadership and strong commitment to multilateralism, and I call on the broader Fund membership to follow Japan's lead. | Japan has a longstanding record of helping others, and of supporting the IMF in its core mission of helping to support economic stability in all its member countries. I am grateful for Japan's leadership and strong commitment to multilateralism, and I call on the broader Fund membership to follow Japan's lead. |
| However, the IMF is still less than half way towards the goal of a $600bn firewall (which Lagarde announced in January). In fact, the only other commitment is the $200bn promised by eurozone states themselves. | However, the IMF is still less than half way towards the goal of a $600bn firewall (which Lagarde announced in January). In fact, the only other commitment is the $200bn promised by eurozone states themselves. |
| It seems unlikely that the IMF will elicit another $340bn of loan pledges today. Indeed, Lagarde has told Italian financial daily Il Sole 24 Ore that it could take several weeks to get final agreement..... | It seems unlikely that the IMF will elicit another $340bn of loan pledges today. Indeed, Lagarde has told Italian financial daily Il Sole 24 Ore that it could take several weeks to get final agreement..... |
| 7.08am: Japan's pledge of $60bn of new loans for the International Monetary Fund was announced by finance minister Jun Azumi in Toyko, following a cabinet meeting. | 7.08am: Japan's pledge of $60bn of new loans for the International Monetary Fund was announced by finance minister Jun Azumi in Toyko, following a cabinet meeting. |
| Azumi told reporters that he hopes that the move will encourage other countries to follow suit, to avoid Europe's debt crisis causing more harm to the global economy. He said: | Azumi told reporters that he hopes that the move will encourage other countries to follow suit, to avoid Europe's debt crisis causing more harm to the global economy. He said: |
| Following a series of eurozone's policy responses, it is important to strengthen IMF funding and pave the way for ensuring an end to the crisis not only for the eurozone but also for Japan and Asian countries. | Following a series of eurozone's policy responses, it is important to strengthen IMF funding and pave the way for ensuring an end to the crisis not only for the eurozone but also for Japan and Asian countries. |
| Azumi added, though, that it will be "difficult" for the IMF to win enough new commitments this week to hit its target of a $600bn firewall. America is refusing to increase its commitment, while major emerging nations are also proving reluctant. | Azumi added, though, that it will be "difficult" for the IMF to win enough new commitments this week to hit its target of a $600bn firewall. America is refusing to increase its commitment, while major emerging nations are also proving reluctant. |
| Azumi also criticised Europe's failure to make more progress in resolving the crisis, saying: | Azumi also criticised Europe's failure to make more progress in resolving the crisis, saying: |
| I don't think Europe has made enough efforts on their own....I must urge them to beef up their firewall further. | I don't think Europe has made enough efforts on their own....I must urge them to beef up their firewall further. |
| 7.00am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis. | 7.00am: Good morning, and welcome to our rolling coverage of the eurozone debt crisis. |
| It's a lively start to the day. In the last few hours, Japan has promised to lend $60bn to the International Monetary Fund, to fund a new global firewall to protect the world economy. We'll have full details and reaction to the move shortly. | It's a lively start to the day. In the last few hours, Japan has promised to lend $60bn to the International Monetary Fund, to fund a new global firewall to protect the world economy. We'll have full details and reaction to the move shortly. |
| And a few minutes ago, India's central bank lowered interest rates for the first time in three years. The 50 basis-point cut to the benchmark lending rate to 8.00% is deeper than economists had expected, suggesting the Reserve Bank of India is concerned that economic growth is flagging. | And a few minutes ago, India's central bank lowered interest rates for the first time in three years. The 50 basis-point cut to the benchmark lending rate to 8.00% is deeper than economists had expected, suggesting the Reserve Bank of India is concerned that economic growth is flagging. |
| Spain remains in the spotlight, with a bond auction due this morning. It plans to raise up to €3bn of 12 and 18-month bills – but will it find enough buyers, and at what price? | Spain remains in the spotlight, with a bond auction due this morning. It plans to raise up to €3bn of 12 and 18-month bills – but will it find enough buyers, and at what price? |
| Also coming up -- the latest inflation data for the eurozone and the UK, and the start of the IMF's Spring Meetings in Washington. | Also coming up -- the latest inflation data for the eurozone and the UK, and the start of the IMF's Spring Meetings in Washington. |