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You can find the current article at its original source at http://www.guardian.co.uk/business/blog/2012/jun/14/eurozone-crisis-live-spanish-borrowing-costs
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| Eurozone crisis live: Spanish borrowing costs hit record high | Eurozone crisis live: Spanish borrowing costs hit record high |
| (40 minutes later) | |
| 3.12pm: Wall Street has opened in fairly positive mood, with the Dow Jones Industrial Average up around 90 points in the first half hour or so of trading. | |
| This despite the weak US data released earlier. Part of the reason could be the expectation that the Federal Reserve, seeing the sluggish economy, could decide to do something about it at next week's meeting. There has been much talk of further quantitative easing, but that is by no means a foregone conclusion. | |
| Annalisa Piazza at Newedge Strategy said: | |
The outcome of next week's meeting is very uncertain as recent data have been depicting a mixed picture for activity and recent comments by the Fed's Bernanke have clearly suggested that the Fed had not made any decision yet, waiting for further evidence before drawing any conclusion. | |
| In our view, the ongoing and prolonged uncertainties surrounding the financial markets might end up being the key factor supporting a possible decision of additional accommodation next week. The outcome of the Greek election will certainly be crucial but - whatever the result is - further volatility in the markets is expected in the coming weeks. | |
| In a nutshell, we see around 60% chances that the [Fed] might decide to announce further accommodation next week. No QE3 is expected to be announced but the Fed might decide to expand and extend the "maturity extension program" for another six months or so. The Fed might "swap" another $100bn-$150bn of short-dated paper for long-dated bonds, in order to keep long rates at the current levels for a more prolonged period of time. Such a move could be seen as an insurance tool against risks (quite high) of spill-over effects from the troubled financial markets to the real economy. | |
| 2.49pm: Time for me to go home. As always, thank you for your comments. I'm handing over to Nick Fletcher. | |
| 2.27pm: Chris Williamson, chief economist at data firm Markit, says the disappointing US data make the case for more economic stimulus more compelling. | 2.27pm: Chris Williamson, chief economist at data firm Markit, says the disappointing US data make the case for more economic stimulus more compelling. |
A sharp fall in inflation and new signs of a weakening job market have opened the door further for the Fed to stimulate the tired-looking US recovery with another dose of stimulus next week. | A sharp fall in inflation and new signs of a weakening job market have opened the door further for the Fed to stimulate the tired-looking US recovery with another dose of stimulus next week. |
Combine these weak labour market data with the recent back-to-back monthly falls in retail sales and disappointing business survey data, which showed exports stagnating in recent months due to the adverse international economic environment, the case for QE3 starts to look quite compelling. | With the unemployment rate running at 8.2% in May, non-farm payrolls showing the weakest rise for a year and today's jobless claims data suggesting the jobless rate could well rise again in June, pressure is mounting on the Fed to give the economy a shot in the arm of additional stimulus when the FOMC meets next week. Combine these weak labour market data with the recent back-to-back monthly falls in retail sales and disappointing business survey data, which showed exports stagnating in recent months due to the adverse international economic environment, the case for QE3 starts to look quite compelling. |
| Rob Carnell at ING added: | Rob Carnell at ING added: |
| All in all, a weak set of numbers. The fall in consumer prices will eventually provide a boost to both the household and corporate sectors, as it stems from lower fuel costs. But it may be several months before we start to see some evidence of the power of low fuel prices in other activity data. Market sentiment will struggle to become more optimistic until then. | All in all, a weak set of numbers. The fall in consumer prices will eventually provide a boost to both the household and corporate sectors, as it stems from lower fuel costs. But it may be several months before we start to see some evidence of the power of low fuel prices in other activity data. Market sentiment will struggle to become more optimistic until then. |
| 2.16pm: Our man in Madrid Giles Tremlett has provided some clarification on rumours of an emergency cabinet meeting. | 2.16pm: Our man in Madrid Giles Tremlett has provided some clarification on rumours of an emergency cabinet meeting. |
| The 20 minutos report does not talk about a crisis cabinet meeting. It talks about his "gabinete de crisis" or "crisis committee", which is a lot different. | The 20 minutos report does not talk about a crisis cabinet meeting. It talks about his "gabinete de crisis" or "crisis committee", which is a lot different. |
| 2.06pm: Here's a (late) lunchtime round-up. | 2.06pm: Here's a (late) lunchtime round-up. |
| • Spanish borrowing costs have surged to alarming levels. Ten-year bond yields breached 7% this morning - the level at which Greece, Ireland and Portugal were forced to seek bailouts - after a double downgrade last night, and despite the Spanish government's decision to seek banking aid worth up to €100bn. Yields are currently at 6.95%, up 17 basis points on the day. | • Spanish borrowing costs have surged to alarming levels. Ten-year bond yields breached 7% this morning - the level at which Greece, Ireland and Portugal were forced to seek bailouts - after a double downgrade last night, and despite the Spanish government's decision to seek banking aid worth up to €100bn. Yields are currently at 6.95%, up 17 basis points on the day. |
| • Italian bond yields have followed suit, rising to 6.2%. Italy managed to sell €4.5bn of bonds but at a high price: the yield on three-year bonds jumped to 5.3%, the highest since December. | • Italian bond yields have followed suit, rising to 6.2%. Italy managed to sell €4.5bn of bonds but at a high price: the yield on three-year bonds jumped to 5.3%, the highest since December. |
| • Meanwhile, Angela Merkel resisted pressure for Germany to underwrite debt or guarantee bank deposits in the eurozone. Addressing parliament in Berlin, the German chancellor rejected "miracle solutions" such as issuing joint euro bonds or setting up a Europe-wide deposit guarantee scheme, backed by her French, Italian and Spanish counterparts. Insted, she called for closer European political integration, although she admitted achieving that would be a "Herculean task". | • Meanwhile, Angela Merkel resisted pressure for Germany to underwrite debt or guarantee bank deposits in the eurozone. Addressing parliament in Berlin, the German chancellor rejected "miracle solutions" such as issuing joint euro bonds or setting up a Europe-wide deposit guarantee scheme, backed by her French, Italian and Spanish counterparts. Insted, she called for closer European political integration, although she admitted achieving that would be a "Herculean task". |
| • European stock markets are still trading lower, with the FTSE in London down 0.7%, Spain's Ibex and Germany's Dax both tumbling 0.5% and France's CAC slipping 0.3% while Italy's FTSE MiB is bucking the trend and just about positive. | • European stock markets are still trading lower, with the FTSE in London down 0.7%, Spain's Ibex and Germany's Dax both tumbling 0.5% and France's CAC slipping 0.3% while Italy's FTSE MiB is bucking the trend and just about positive. |
| 2.04pm: Official US figures have painted a picture of a sluggish economy: inflation eased in May while new claims for unemployment benefits unexpectedly rose last week, by 6,000, taking the total to 386,000. Consumer prices dropped by 0.3% last month - the sharpest decline since December 2008 - as households paid less for petrol, taking the annual rate down to 1.7%. | 2.04pm: Official US figures have painted a picture of a sluggish economy: inflation eased in May while new claims for unemployment benefits unexpectedly rose last week, by 6,000, taking the total to 386,000. Consumer prices dropped by 0.3% last month - the sharpest decline since December 2008 - as households paid less for petrol, taking the annual rate down to 1.7%. |
| 2.00pm: Some technical issues forced us to abandon the old blog and start a new one. Hence the radio silence. We're back in business now. | 2.00pm: Some technical issues forced us to abandon the old blog and start a new one. Hence the radio silence. We're back in business now. |
| In the meantime, Spain's economy minister Luis de Guindos said the government would take further action to reduce his country's debt risk premium that is seen as unsustainable. | In the meantime, Spain's economy minister Luis de Guindos said the government would take further action to reduce his country's debt risk premium that is seen as unsustainable. |
| As Spanish ten-year borrowing costs surged through 7%, the spread between Spanish bonds and benchmark German bunds hit a fresh euro era record of more than 550 basis points. | As Spanish ten-year borrowing costs surged through 7%, the spread between Spanish bonds and benchmark German bunds hit a fresh euro era record of more than 550 basis points. |
| Guindos told reporters in the corridors of parliament: | Guindos told reporters in the corridors of parliament: |
| It is not a situation that can be maintained over time... and I am convinced that we will continue to take more measures in the coming days and weeks to help bring it down. | It is not a situation that can be maintained over time... and I am convinced that we will continue to take more measures in the coming days and weeks to help bring it down. |
| 1.06pm: More on Spain. There is talk of an emergency cabinet meeting to discuss the crisis, which is not really surprising given the Moody's downgrade and the rise in the country's bond yields. | 1.06pm: More on Spain. There is talk of an emergency cabinet meeting to discuss the crisis, which is not really surprising given the Moody's downgrade and the rise in the country's bond yields. |
| But it all adds to the sense of stumbling from one crisis to the next without a clear plan ... | But it all adds to the sense of stumbling from one crisis to the next without a clear plan ... |