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| Eurozone crisis live: Greek politicians scramble for votes | Eurozone crisis live: Greek politicians scramble for votes |
| (40 minutes later) | |
| 9.58am: Some more reaction to the UK's industrial production figures (see 9.29am). David Tinsley at BNP Paribas says: | |
| The outturn in overall industrial production implies a pretty poor start to the second quarter. With core manufacturing production probably falling in May and June too, if the PMIs are a guide, then it will take a bounce in the other areas of industrial production to stop the Q2 data looking bad. It is increasingly hard not to come to the conclusion that the UK manufacturing sector is becoming overwhelmed by the recessionary gales blowing across the Channel. | |
| 9.47am: More on Italian bond (BTP) yields (which have dropped back slightly to 6.14%). Marc Ostwald at Monument Securities says on FT Alphaville that investors are wrong to draw a line from Spain to Italy: | |
| Once again we must highlight that while the high level of BTP yields does no favours for the Italian banks, the fact that while Italy's debt to GDP metrics at 120% plus are ugly, its overall outstanding govt debt stands at just short of €2.0 Trln, but the financial sector has savings and assets in excess of €8.4 Trln, and Italy also has a mortgage to GDP ratio just south of 20% (the Netherlands by contrast has an equivalent ratio of 110%!) – so Italy is in fact rather like Japan rather than the popular myth that says it is similar to Spain, Ireland, Portugal, let alone Greece. | |
| 9.41am: On a monthly basis, UK manufacturing looks even worse; down 0.7% compared with forecasts of a 0.1% drop. Industrial production was unchanged over the month, compared with forecasts of a 0.1% lift. | |
| Philip Shaw of Investec says: | |
| The manufacturing figures are very disappointing and highlight the pressure the sector's under given the gravity of the debt crisis in the euro area, but also the lack of confidence at home. | |
| The wider measure of industrial production is even worse, albeit due to the shutdown of an oil platform in the North Sea. Overall it could be touch and go whether we get a rebound in GDP in Q2, though much depends on the construction output figures. And policywise, MPC members will no doubt be giving serious thought to sancitoning more QE at some stage over the next couple of months. | |
| 9.28am: CORRECTION, the forecast for manufacturing was for an increase of 0.4%, so results were much worse than expected... | |
| UK industrial production fell 1% in April compared with the same month last year, in line with expectations. Manufacturing fell by 0.3%, compared with forecasts of an increase of 0.4%. | |
| 9.17am: And sticking with bond yields for a second, Ed Conway at Sky gives us some historical context to Spanish borrowing costs (now up at 6.66%). | |
| Bailout hangover worsens: Spanish govt borrowing rates hit 6.6%. If this continues cld hit highest level since mid-90s twitter.com/EdConwaySky/st… | Bailout hangover worsens: Spanish govt borrowing rates hit 6.6%. If this continues cld hit highest level since mid-90s twitter.com/EdConwaySky/st… |
| — Ed Conway (@EdConwaySky) June 12, 2012 | — Ed Conway (@EdConwaySky) June 12, 2012 |
| 9.05am: In the case of Italian bond yields (see 8.49am), economist Shaun Richards notes that investors are increasingly worried about Italy's contribution to Spain's bailout. | 9.05am: In the case of Italian bond yields (see 8.49am), economist Shaun Richards notes that investors are increasingly worried about Italy's contribution to Spain's bailout. |
| More and more are focusing on the extra 19.2 billion #Euros that Italy will guarantee to Spain as her ten year bond yield rises to 6.1% | More and more are focusing on the extra 19.2 billion #Euros that Italy will guarantee to Spain as her ten year bond yield rises to 6.1% |
| — Shaun Richards (@notayesmansecon) June 12, 2012 | — Shaun Richards (@notayesmansecon) June 12, 2012 |
| 8.49am: Spanish and Italian bond yields - or borrowing costs - are on the rise. | 8.49am: Spanish and Italian bond yields - or borrowing costs - are on the rise. |
| Italian yields are up at 6.17% (their highest level since January), while Spanish yields have climbed to 6.53%. | Italian yields are up at 6.17% (their highest level since January), while Spanish yields have climbed to 6.53%. |
| Bond investors are nervous that the EU will use the european stability mechanism to lend money directly to Spain. That would push existing holders of Spanish government bonds down the pecking order, ie the ESM will be paid back before them in the case of a default. Gary Jenkins of Swordfish Research reflected on the situation in his morning comment: | Bond investors are nervous that the EU will use the european stability mechanism to lend money directly to Spain. That would push existing holders of Spanish government bonds down the pecking order, ie the ESM will be paid back before them in the case of a default. Gary Jenkins of Swordfish Research reflected on the situation in his morning comment: |
| I wonder if yesterday's bond market reaction will lead to a change of tack from the EU. They do not seem to understand the basic principle that they are reliant upon bond investors and thus they should be trying to encourage them to buy, not discourage them. There was unofficial confirmation that the ESM would be used and subordination would take place although funny enough late in the afternoon as Spanish and Italian yields got smacked there were headlines on Reuters suggesting that maybe there wouldn't be subordination and maybe they could use the EFSF initially before passing the loans onto the ESM….it really does look like they didn't even consider this aspect of the bailout and there are times when they do almost appear to be making it up as they go along. | I wonder if yesterday's bond market reaction will lead to a change of tack from the EU. They do not seem to understand the basic principle that they are reliant upon bond investors and thus they should be trying to encourage them to buy, not discourage them. There was unofficial confirmation that the ESM would be used and subordination would take place although funny enough late in the afternoon as Spanish and Italian yields got smacked there were headlines on Reuters suggesting that maybe there wouldn't be subordination and maybe they could use the EFSF initially before passing the loans onto the ESM….it really does look like they didn't even consider this aspect of the bailout and there are times when they do almost appear to be making it up as they go along. |
| 8.27am: There are conflicting messages coming out about Spain's banking bailout. Spanish prime minister Mariano Rajoy says the deal comes with no conditions, while the European Commission has said Spain will not receive any special treatment. It seems the vice-president of the EC was unwilling to clarify things when questioned by Dow Jones reporter Matina Stevis last night. | 8.27am: There are conflicting messages coming out about Spain's banking bailout. Spanish prime minister Mariano Rajoy says the deal comes with no conditions, while the European Commission has said Spain will not receive any special treatment. It seems the vice-president of the EC was unwilling to clarify things when questioned by Dow Jones reporter Matina Stevis last night. |
| Last night in Strasbourg, I asked Olli Rehn if aid wd be withheld from Spain should it miss its 2012 5.3% deficit target. He didn't respond | Last night in Strasbourg, I asked Olli Rehn if aid wd be withheld from Spain should it miss its 2012 5.3% deficit target. He didn't respond |
| — Matina Stevis (@MatinaStevis) June 12, 2012 | — Matina Stevis (@MatinaStevis) June 12, 2012 |
| 8.17am: Markets across Europe are struggling to make any headway this morning, as investors continue to digest news of Spain's banking bailout. | 8.17am: Markets across Europe are struggling to make any headway this morning, as investors continue to digest news of Spain's banking bailout. |
| UK's FTSE: up 0.07% at 5436 points Germany's DAX: unchanged Spain's IBEX: down 0.4% Italy's FTSE MIB: down 0.2% France's CAC: up 0.2% | UK's FTSE: up 0.07% at 5436 points Germany's DAX: unchanged Spain's IBEX: down 0.4% Italy's FTSE MIB: down 0.2% France's CAC: up 0.2% |
| 8.09am: There's more evidence that companies are feeling the pain from the eurozone crisis. BAA's statistics this morning are particularly stark, with a dramatic drop in traffic from countries at the centre of the storm. My colleague Dan Milmo reports: | 8.09am: There's more evidence that companies are feeling the pain from the eurozone crisis. BAA's statistics this morning are particularly stark, with a dramatic drop in traffic from countries at the centre of the storm. My colleague Dan Milmo reports: |
| BAA said passenger numbers between Britain's largest airport and Greece dropped 11.3% compared with May last year, with traffic to and from Italy falling 9.2% and Spain by 2.5%. Portugal was the biggest faller, declining by 11.4%. BAA said that Heathrow carried 5.8 million people overall last month, a fall of 0.6% on the same period last year. | BAA said passenger numbers between Britain's largest airport and Greece dropped 11.3% compared with May last year, with traffic to and from Italy falling 9.2% and Spain by 2.5%. Portugal was the biggest faller, declining by 11.4%. BAA said that Heathrow carried 5.8 million people overall last month, a fall of 0.6% on the same period last year. |
| 7.59am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. All eyes will be on Spanish and Italian bond yields today, following Spain's banking bailout. And Greek politicians are campaigning furiously ahead of the elections this weekend, with Antonis Samaras and Alexis Tsipras due to speak later. | 7.59am: Good morning, and welcome to our rolling coverage of the eurozone financial crisis. All eyes will be on Spanish and Italian bond yields today, following Spain's banking bailout. And Greek politicians are campaigning furiously ahead of the elections this weekend, with Antonis Samaras and Alexis Tsipras due to speak later. |
| Italy's prime minister Mario Monti is due to meet Swiss president Eveline Widmer-Schlumpf to discuss tax. While the German chancellor Angela Merkel and her finance minister will be speaking at an economics conference in Berlin. | Italy's prime minister Mario Monti is due to meet Swiss president Eveline Widmer-Schlumpf to discuss tax. While the German chancellor Angela Merkel and her finance minister will be speaking at an economics conference in Berlin. |
| This is today's agenda: | This is today's agenda: |
| • Sweden CPI for May: 8.30am • UK industrial output for April: 9.30am • UK manufacturing output for April: 9.30am • Andreas Dombret, board member of the Bunedsbank, speaks: 11am • French president Francois Hollande speaks: 1.30pm • UK GDP estimate by NIESR: 3pm • IMF chief Christine Lagarde speaks: 3pm • Joerg Asmussen, ECB board member, speaks: 3.30pm • ECB financial stability review: 4pm • US monthly budget statement for May: 7pm | • Sweden CPI for May: 8.30am • UK industrial output for April: 9.30am • UK manufacturing output for April: 9.30am • Andreas Dombret, board member of the Bunedsbank, speaks: 11am • French president Francois Hollande speaks: 1.30pm • UK GDP estimate by NIESR: 3pm • IMF chief Christine Lagarde speaks: 3pm • Joerg Asmussen, ECB board member, speaks: 3.30pm • ECB financial stability review: 4pm • US monthly budget statement for May: 7pm |
| In the debt markets, the UK is selling five-year Treasury gilts. Austria is selling €1.1bn of 50 and 10-year bonds and the Netherlands is selling €1.5bn-2.5bn in 20-year bonds. Belgium, Greece and the US are selling short-dated treasury bills. | In the debt markets, the UK is selling five-year Treasury gilts. Austria is selling €1.1bn of 50 and 10-year bonds and the Netherlands is selling €1.5bn-2.5bn in 20-year bonds. Belgium, Greece and the US are selling short-dated treasury bills. |