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Eurozone crisis live: Moody's expected to downgrade UK banks tonight Eurozone crisis live: Moody's expected to downgrade UK banks tonight
(39 minutes later)
2.29pm: Credit rating agency Standard & Poor's has looked at the €100bn bailout offered to Spain's banks by the EU and concluded it is "enough to cover the system's potential capital needs for 2012-2013".
S&P credit analyst Elena Iparraguirre said:
We consider there is still uncertainty about the bailout implementation details, though, particularly regarding provisioning and capital requirements and the implications of the outcome of independent reviews currently underway. We are sceptical about the bailout being able to reduce the financial system's funding challenges in the short term as well as on lending resuming any time soon.
She added that the credit ratings of Spanish banks would not be immediately affected by the bailout.
However given the uncertainties about the full details of the bailout, we do not rule out the possibility that we could revise down some of our assessments of the standalone credit profiles for some banks as more information is made available.
The Spanish government is due to hold a press conference at 4.30pm BST to present the findings of bank stress tests undertaken by independent consultants.
1.37pm: There is a growing expectation that Moody's may downgrade its ratings on UK banks this evening. The Guardian's banking correspondent Jill Treanor reports:1.37pm: There is a growing expectation that Moody's may downgrade its ratings on UK banks this evening. The Guardian's banking correspondent Jill Treanor reports:
The market has been awaiting the news of a review by Moody's ever since the agency first announced in February that it was looking at more than 100 financial institutions in Europe and a handful of US banks.The market has been awaiting the news of a review by Moody's ever since the agency first announced in February that it was looking at more than 100 financial institutions in Europe and a handful of US banks.
Back in February, Moody's warned that Royal Bank of Scotland, 83% owned by the taxpayer, faced a one notch downgrade and Barclays and HSBC a downgrade of up to two notches. Lloyds Banking Group is also among those facing a downgrade.Back in February, Moody's warned that Royal Bank of Scotland, 83% owned by the taxpayer, faced a one notch downgrade and Barclays and HSBC a downgrade of up to two notches. Lloyds Banking Group is also among those facing a downgrade.
A downgrade can raise the borrowing costs of banks (as they may be deemed slightly less likely to pay back any loans) and also require them to post collateral against existing positions. RBS, for instance, has already warned that a one notch downgrade by a ratings agency could cost it £12.5bn in having to post extra collateral to some creditors although analysts reckon that markets had been well prepared for any downgrades to the UK major banks.A downgrade can raise the borrowing costs of banks (as they may be deemed slightly less likely to pay back any loans) and also require them to post collateral against existing positions. RBS, for instance, has already warned that a one notch downgrade by a ratings agency could cost it £12.5bn in having to post extra collateral to some creditors although analysts reckon that markets had been well prepared for any downgrades to the UK major banks.
The review took two formats. The one for investment banks - which covered Barclays, RBS and HSBC - looked at " structural vulnerabilities in the business models of global investment banks, which include the confidence-sensitivity of customers and funding ounterparties, risk-management and governance challenges, as well as a high degree of interconnectedness and
opacity".		The review took two formats. The one for investment banks - which covered Barclays, RBS and HSBC - looked at " structural vulnerabilities in the business models of global investment banks, which include the confidence-sensitivity of customers and funding ounterparties, risk-management and governance challenges, as well as a high degree of interconnectedness and
opacity".
There was also one for European banks which looked at a number of areas including the "very difficult" operating environment in Europe.There was also one for European banks which looked at a number of areas including the "very difficult" operating environment in Europe.
12.55pm: Greece's new government wants to ask international lenders for an extra two years to meet its fiscal targets - with huge public pressure for a softening of the bailout terms.12.55pm: Greece's new government wants to ask international lenders for an extra two years to meet its fiscal targets - with huge public pressure for a softening of the bailout terms.
Prime minister Antonis Samaras, leader of the conservative New Democracy party, is expected to unveil his cabinet today, but it is unlikely to include any big hitters from his leftwing allies - a sign of their reluctant support for the new government.Prime minister Antonis Samaras, leader of the conservative New Democracy party, is expected to unveil his cabinet today, but it is unlikely to include any big hitters from his leftwing allies - a sign of their reluctant support for the new government.
12.53pm: Moody's is expected to downgrade its ratings on UK banks this evening, it appears.12.53pm: Moody's is expected to downgrade its ratings on UK banks this evening, it appears.
Markets have been waiting for this move for a while, as the ratings agency goes round the world downgrading countries' financial institutions in the wake of the current crisis.Markets have been waiting for this move for a while, as the ratings agency goes round the world downgrading countries' financial institutions in the wake of the current crisis.
Sky News is now reporting the downgrade will happen this evening. And just because it is expected, that does not mean it will have no effect, since it is likely to mean an increase in funding costs for the likes of Barclays, Royal Bank of Scotland etc.Sky News is now reporting the downgrade will happen this evening. And just because it is expected, that does not mean it will have no effect, since it is likely to mean an increase in funding costs for the likes of Barclays, Royal Bank of Scotland etc.
12.21pm: What is the Federal Reserve and what does it do? – watch our animated guide.12.21pm: What is the Federal Reserve and what does it do? – watch our animated guide.
The Fed could soon step in with a new round of actions to bolster the fragile American recovery as Europe's woes continue to rattle the US economy. But how does the Fed regulate the world's largest economy, and why are some people against it?The Fed could soon step in with a new round of actions to bolster the fragile American recovery as Europe's woes continue to rattle the US economy. But how does the Fed regulate the world's largest economy, and why are some people against it?
12.06pm: American economics professor Nouriel Roubini has tweeted this:12.06pm: American economics professor Nouriel Roubini has tweeted this:
Berlusconi says: "It isn't blasphemous to exit the Euro" signaling the he/his party & powerful business interests want to return to the LiraBerlusconi says: "It isn't blasphemous to exit the Euro" signaling the he/his party & powerful business interests want to return to the Lira
— Nouriel Roubini (@Nouriel) June 21, 2012— Nouriel Roubini (@Nouriel) June 21, 2012
12.00pm: The Spanish government will hold a press conference at 4.30pm BST to present the results of the Spanish bank stress tests. Economy minister Fernando Jiménez Latorre and deputy governor of Banco de España, Fernando Restoy, will answer questions.12.00pm: The Spanish government will hold a press conference at 4.30pm BST to present the results of the Spanish bank stress tests. Economy minister Fernando Jiménez Latorre and deputy governor of Banco de España, Fernando Restoy, will answer questions.
11.44am: Time for an early lunchtime round-up. Stock markets are still trading lower: the FTSE is down 34 points, or 0.6% at 5587; Germany's Dax has lost nearly 0.4% at 6368; and France's CAC is down more than 0.4% at 3113. Spain's Ibex has is more or less flat at 6794 while Italy's FTSE MiB has edged 0.25% higher to 13766.11.44am: Time for an early lunchtime round-up. Stock markets are still trading lower: the FTSE is down 34 points, or 0.6% at 5587; Germany's Dax has lost nearly 0.4% at 6368; and France's CAC is down more than 0.4% at 3113. Spain's Ibex has is more or less flat at 6794 while Italy's FTSE MiB has edged 0.25% higher to 13766.
Spain auctioned bonds worth €2.2bn, more than expected, but paid the highest interest rates in 15 years for five-year bonds.Spain auctioned bonds worth €2.2bn, more than expected, but paid the highest interest rates in 15 years for five-year bonds.
On the open market, Spanish borrowing costs are falling, though. The yield on 10-year government bonds has dropped 23 basis points to 6.532%. The Italian yield is also down, to 5.718%.On the open market, Spanish borrowing costs are falling, though. The yield on 10-year government bonds has dropped 23 basis points to 6.532%. The Italian yield is also down, to 5.718%.
The meeting of eurozone finance ministers in Brussels has got under way, with a press conference expected around 7pm London time. The meeting of eurozone finance ministers in Luxembourg has got under way, with a press conference expected around 7pm London time.
Germany released disappointing manufacturing survey data this morning and eurozone business surveys pointed to a double dip recession, heightening expectations of an ECB interest rate cut and other action next month.Germany released disappointing manufacturing survey data this morning and eurozone business surveys pointed to a double dip recession, heightening expectations of an ECB interest rate cut and other action next month.
10.49am: My colleague David Gow has just tweeted this, ahead of the Germany-Greece game (Euro 2012 quarterfinal) tomorrow night:10.49am: My colleague David Gow has just tweeted this, ahead of the Germany-Greece game (Euro 2012 quarterfinal) tomorrow night:
Schäuble forecasts 3-1 for Germany v Greece in Zeit interview: lass uns mal sehen. if wrong, what does that say about his analytical powers?Schäuble forecasts 3-1 for Germany v Greece in Zeit interview: lass uns mal sehen. if wrong, what does that say about his analytical powers?
— David Gow (@gowdav) June 21, 2012— David Gow (@gowdav) June 21, 2012
10.10am: Nicholas Spiro of consultancy Spiro Sovereign Strategy, has sent us his thoughts on the Spanish bond auction.10.10am: Nicholas Spiro of consultancy Spiro Sovereign Strategy, has sent us his thoughts on the Spanish bond auction.
1. While sentiment going into today's auction was a tad more favourable, this is of little consequence to underlying concerns about Spain's creditworthiness. The modest size of today's sale helped domestic buyers absorb the supply. Spanish and Italian auctions are following a similar pattern: while demand is holding up, the concessions are becoming heftier and heftier. Indeed yields on Spain's 3 and 5-year notes at today's auction were at secondary market levels.1. While sentiment going into today's auction was a tad more favourable, this is of little consequence to underlying concerns about Spain's creditworthiness. The modest size of today's sale helped domestic buyers absorb the supply. Spanish and Italian auctions are following a similar pattern: while demand is holding up, the concessions are becoming heftier and heftier. Indeed yields on Spain's 3 and 5-year notes at today's auction were at secondary market levels.
2. Spain's decision to request external financial assistance for its banks was a game-changer. It has put the spotlight firmly on the sovereign and fanned concerns that a full-fledged bail-out will ensue. At the root of Spain's woes is a vicious circle in which the severe problems of its savings banks, the weakness of its public finances and the sharpness of the economic downturn are all feeding on each other.2. Spain's decision to request external financial assistance for its banks was a game-changer. It has put the spotlight firmly on the sovereign and fanned concerns that a full-fledged bail-out will ensue. At the root of Spain's woes is a vicious circle in which the severe problems of its savings banks, the weakness of its public finances and the sharpness of the economic downturn are all feeding on each other.
3. It's very difficult to see how buying bonds on the secondary market could turn sentiment around. The scale of the purchases would need to be considerable to make a difference, and the effects would be short-lived. Buying on the primary market would prove more effective but would come with strings attached. The reality is that, without a clear path towards a fiscal and banking union across the eurozone, restoring confidence in Spanish debt will prove extremely difficult.3. It's very difficult to see how buying bonds on the secondary market could turn sentiment around. The scale of the purchases would need to be considerable to make a difference, and the effects would be short-lived. Buying on the primary market would prove more effective but would come with strings attached. The reality is that, without a clear path towards a fiscal and banking union across the eurozone, restoring confidence in Spanish debt will prove extremely difficult.
10.07am: Peter Chatwell, rate strategist at Crédit Agricole, told Reuters:10.07am: Peter Chatwell, rate strategist at Crédit Agricole, told Reuters:
The auctions have all been well bid, particularly the 2014s [two-year bonds] which came through the market and was also very well covered. The rally over the past three days will have helped garner this strong bidding, seemingly with the market not wanting to be short given the pending talks regarding the EFSF/ESM.The auctions have all been well bid, particularly the 2014s [two-year bonds] which came through the market and was also very well covered. The rally over the past three days will have helped garner this strong bidding, seemingly with the market not wanting to be short given the pending talks regarding the EFSF/ESM.
10.04am: Demand was high at the Spanish bond sales, with bid-to-cover ratios rising on all three maturies from the last time each bond was sold. The Spanish Treasury sold €700m of two-year bonds, €918m of three-year bonds and €602m of five-year bonds, beating its €2bn target for the total amount auctioned.10.04am: Demand was high at the Spanish bond sales, with bid-to-cover ratios rising on all three maturies from the last time each bond was sold. The Spanish Treasury sold €700m of two-year bonds, €918m of three-year bonds and €602m of five-year bonds, beating its €2bn target for the total amount auctioned.
9.59am: ...and some instant reaction to that key bond auction in Madrid.9.59am: ...and some instant reaction to that key bond auction in Madrid.
Nick Stamenkovic, rate strategist at RIA Capital Markets in Edinburgh, says:Nick Stamenkovic, rate strategist at RIA Capital Markets in Edinburgh, says:
Peripheral markets relieved that Spain managed to raise a tad above the upper end of the target. Demand was decent for all three auctions, probably driven by domestic investors, but yields significantly higher than previously, indicative of the rising risk premium demanded for purchasing Spanish government bonds. Against this backdrop short-dated yields should rally further near-term as shorts are covered amid rising hopes of policy action at next week's key EU summit, steepening the yield curve.Peripheral markets relieved that Spain managed to raise a tad above the upper end of the target. Demand was decent for all three auctions, probably driven by domestic investors, but yields significantly higher than previously, indicative of the rising risk premium demanded for purchasing Spanish government bonds. Against this backdrop short-dated yields should rally further near-term as shorts are covered amid rising hopes of policy action at next week's key EU summit, steepening the yield curve.
9.51am: Spain has sold €2.2bn of bonds, more than it had targeted - but at a high cost. The average yield on the five-year bond has jumped to 6.072% against 4.96% at the last auction, reaching a 15-year high.9.51am: Spain has sold €2.2bn of bonds, more than it had targeted - but at a high cost. The average yield on the five-year bond has jumped to 6.072% against 4.96% at the last auction, reaching a 15-year high.
The yield on the three-year bonds rose to 5.547% from 4.876% at the previous auction, and the yield on the two-year bonds leapt to 4.706%, more than double that paid in 2.069%.The yield on the three-year bonds rose to 5.547% from 4.876% at the previous auction, and the yield on the two-year bonds leapt to 4.706%, more than double that paid in 2.069%.
9.47am: It's amazing what difference a little sunshine makes, says Alan Clarke at Scotia Bank, who has crunched the latest UK retail sales numbers.9.47am: It's amazing what difference a little sunshine makes, says Alan Clarke at Scotia Bank, who has crunched the latest UK retail sales numbers.
Some decent news at last. Including auto fuel, sales rose by 1.4% m/m. Stripping that out, sales were up by 0.9% m/m.Some decent news at last. Including auto fuel, sales rose by 1.4% m/m. Stripping that out, sales were up by 0.9% m/m.
Headline sales were always going to be supported by a bounce in auto fuel sales. However the strength was not all down to auto fuel. Clothing sales bounced by almost 3½%. April was a washout, so consumers' appetite for spring fashion was dampened. By contrast, there were 60% more sunshine hours in May (and 10% more than the seasonal norm), and it was also a bit warmer, which helped to boost this component.Headline sales were always going to be supported by a bounce in auto fuel sales. However the strength was not all down to auto fuel. Clothing sales bounced by almost 3½%. April was a washout, so consumers' appetite for spring fashion was dampened. By contrast, there were 60% more sunshine hours in May (and 10% more than the seasonal norm), and it was also a bit warmer, which helped to boost this component.
Food sales also did ok, probably for the same reason as there was opportunity for a bbq or two.Food sales also did ok, probably for the same reason as there was opportunity for a bbq or two.
More generally, the trend in consumer spending should be improving as the burden from non-discretionary spending (i.e. food and energy) continues to ease, which makes more room for faster discretionary spending.More generally, the trend in consumer spending should be improving as the burden from non-discretionary spending (i.e. food and energy) continues to ease, which makes more room for faster discretionary spending.
The trend in retail sales should therefore be upwards from here, helping to contribute to better news for growth as the year progresses.The trend in retail sales should therefore be upwards from here, helping to contribute to better news for growth as the year progresses.
9.37am: Meanwhile, in Britain shoppers turned out in force in May, splashing out on clothes and shoes as the weather improved (temporarily). Retail sales volumes bounced back 1.4%, although that was not enough to reverse April's 2.4% fall.9.37am: Meanwhile, in Britain shoppers turned out in force in May, splashing out on clothes and shoes as the weather improved (temporarily). Retail sales volumes bounced back 1.4%, although that was not enough to reverse April's 2.4% fall.
9.28am: Here is some reaction to the PMI numbers, which painted a worrying picture of the eurozone economy.9.28am: Here is some reaction to the PMI numbers, which painted a worrying picture of the eurozone economy.
Eurozone PMI signals double-dip recession, says Peter vanden Houte at ING.Eurozone PMI signals double-dip recession, says Peter vanden Houte at ING.
All in all, today's still dismal PMI figures show that even Germany is now starting to suffer on the back of the uncertainty created by the euro crisis and the clear deceleration of activity in the emerging economies. Our expectation of 0.4% contraction in second quarter GDP is starting to look conservative on the back of the latest figures.All in all, today's still dismal PMI figures show that even Germany is now starting to suffer on the back of the uncertainty created by the euro crisis and the clear deceleration of activity in the emerging economies. Our expectation of 0.4% contraction in second quarter GDP is starting to look conservative on the back of the latest figures.
It seems clear that no significant recovery can be expected as long as the future of the Eurozone remains in doubt. Therefore markets will be awaiting a strong commitment from European leaders at the summit next week to take the necessary steps to strengthen the monetary union in the coming years. Joint issuance of short term bonds, the establishment of a debt redemption fund and steps towards the creation of a banking union are likely to be on the agenda.It seems clear that no significant recovery can be expected as long as the future of the Eurozone remains in doubt. Therefore markets will be awaiting a strong commitment from European leaders at the summit next week to take the necessary steps to strengthen the monetary union in the coming years. Joint issuance of short term bonds, the establishment of a debt redemption fund and steps towards the creation of a banking union are likely to be on the agenda.
Since Treaty changes might be needed to implement some of these plans, which might take years, we expect more immediate action from the ECB after the summit. A 25 basis point rate cut for July now look all but sure, but additional liquidity injections (LTRO, liquidity access for the ESM) might also be contemplated if market tensions don't subside after the summit.
The next few weeks will be crucial for the Eurozone. If anything, today's figure can serve as a wake-up call for European leaders that decisive action is badly needed.		Since Treaty changes might be needed to implement some of these plans, which might take years, we expect more immediate action from the ECB after the summit. A 25 basis point rate cut for July now look all but sure, but additional liquidity injections (LTRO, liquidity access for the ESM) might also be contemplated if market tensions don't subside after the summit.
The next few weeks will be crucial for the Eurozone. If anything, today's figure can serve as a wake-up call for European leaders that decisive action is badly needed.
Stephan Rieke, economist at BHF Bank, reckons the ECB will spring into action next month:Stephan Rieke, economist at BHF Bank, reckons the ECB will spring into action next month:
This is not a surprise for the ECB or the market. The expectations were very negative before the publication of htese numbers and they are still quite negative. The ECB already pointed to heightened uncertainty and heightened downward risks to growth. I think they just wanted to wait with action until the whole package is prepared.This is not a surprise for the ECB or the market. The expectations were very negative before the publication of htese numbers and they are still quite negative. The ECB already pointed to heightened uncertainty and heightened downward risks to growth. I think they just wanted to wait with action until the whole package is prepared.
I'd expect the ECB to act in July at the latest. Which means on the one hand interest rate cuts, of course, combined with a package of measures that the eurozone finance minsters are preparing. I would expect more than just a rate cut. More non-conventional measures you might say.I'd expect the ECB to act in July at the latest. Which means on the one hand interest rate cuts, of course, combined with a package of measures that the eurozone finance minsters are preparing. I would expect more than just a rate cut. More non-conventional measures you might say.
Howard Archer, chief UK and European economist at IHS Global Insight, concurs:Howard Archer, chief UK and European economist at IHS Global Insight, concurs:
The only remotely positive spin that can be put on the dismal eurozone purchasing managers surveys for June is that there was no further deepening in the overall rate of contraction in services and manufacturing activity. Hardly a cause for celebration!The only remotely positive spin that can be put on the dismal eurozone purchasing managers surveys for June is that there was no further deepening in the overall rate of contraction in services and manufacturing activity. Hardly a cause for celebration!
The surveys reinforce pressure on the ECB to cut interest rates and we suspect a 25 basis point cut from 1% to 0.75% is very much on the cards for July. The lower price indices evident inthe PMI surveys add to the evidence that inflationary pressures are easing in the eurozone, giving the ECB ample scope to trim interest rates.The surveys reinforce pressure on the ECB to cut interest rates and we suspect a 25 basis point cut from 1% to 0.75% is very much on the cards for July. The lower price indices evident inthe PMI surveys add to the evidence that inflationary pressures are easing in the eurozone, giving the ECB ample scope to trim interest rates.
Dominique Barbet at BNP Paribas:Dominique Barbet at BNP Paribas:

The picture is not changing, it is not improving, and the PMIs are still clearly in recession territory for the eurozone. For the time being, and if we cannot sort out the financial crisis especially with the summit at the end of this month, the eurozone is likely to remain in recession.
The picture is not changing, it is not improving, and the PMIs are still clearly in recession territory for the eurozone. For the time being, and if we cannot sort out the financial crisis especially with the summit at the end of this month, the eurozone is likely to remain in recession.
Peter Dixon at Commerzbank:Peter Dixon at Commerzbank:
The ECB will do more, that will probably involve a rate cut, which is symbolic but is action. If the need arises they will come back into the market with more LTROs despite the fact it is something they said they were not considering.The ECB will do more, that will probably involve a rate cut, which is symbolic but is action. If the need arises they will come back into the market with more LTROs despite the fact it is something they said they were not considering.
9.24am: The eurozone private sector has taken another turn for the worse, according to the latest PMI business surveys. The composite PMI - made up of both manufacturing and services - was at 46 in June, unchanged from May - indicating further contraction. The 50 mark divides expansion from contraction. Services came in at 46.8 versus 46.7 in May, a tad better but still shrinking, while manufacturing was worse at 44.8 against May's 45.1.9.24am: The eurozone private sector has taken another turn for the worse, according to the latest PMI business surveys. The composite PMI - made up of both manufacturing and services - was at 46 in June, unchanged from May - indicating further contraction. The 50 mark divides expansion from contraction. Services came in at 46.8 versus 46.7 in May, a tad better but still shrinking, while manufacturing was worse at 44.8 against May's 45.1.
The manufacturing and composite PMI readings are the lowest since June 2009, which doesn't bode well for the eurozone economies.The manufacturing and composite PMI readings are the lowest since June 2009, which doesn't bode well for the eurozone economies.
8.50am: Ilya Spivak, currency strategist at DailyFX, looks ahead to the eurozone finance ministers' meeting, the Spanish bond auction and the publication of the Spanish bank stress tests:8.50am: Ilya Spivak, currency strategist at DailyFX, looks ahead to the eurozone finance ministers' meeting, the Spanish bond auction and the publication of the Spanish bank stress tests:
Eurozone finance ministers begin a two-day meeting in Brussels. Coming on the heels of the G20 summit where EU policymakers faced heavy pressure from global leaders to step up crisis containment efforts, the sit-down may see the emergence of preliminary policy ideas. Concrete initiatives are likely to wait until the EU leaders' summit next week, but traders will nonetheless pay close attention to sideline commentary for early clues. Eurozone finance ministers begin a two-day meeting in Luxembourg. Coming on the heels of the G20 summit where EU policymakers faced heavy pressure from global leaders to step up crisis containment efforts, the sit-down may see the emergence of preliminary policy ideas. Concrete initiatives are likely to wait until the EU leaders' summit next week, but traders will nonetheless pay close attention to sideline commentary for early clues.
Spain is also set to release the results of an audit meant to put a firm price tag on recapitalizing the country's banking sector. A number above or uncomfortably close to €100bn – the upper limit of the bailout Madrid secured last week – is likely to rekindle sovereign risk jitters. The results of a bond auction offering 2014, 2015 and 2017 paper today will serve as an instant barometer of the fallout, with a pick-up in average yields and/or particularly weak bid-to-cover readings likely to compound pressure on risky assets.Spain is also set to release the results of an audit meant to put a firm price tag on recapitalizing the country's banking sector. A number above or uncomfortably close to €100bn – the upper limit of the bailout Madrid secured last week – is likely to rekindle sovereign risk jitters. The results of a bond auction offering 2014, 2015 and 2017 paper today will serve as an instant barometer of the fallout, with a pick-up in average yields and/or particularly weak bid-to-cover readings likely to compound pressure on risky assets.
8.43am: The French manufacturing PMI, by contrast, improved slightly, whilst showing further contraction. It came in at 45.3 for June compared with 44.6 in May, and was better than expected.8.43am: The French manufacturing PMI, by contrast, improved slightly, whilst showing further contraction. It came in at 45.3 for June compared with 44.6 in May, and was better than expected.
And the situation in the French service industries also improved, with the PMI rising to 47.3 from 45.1 in May - but remaining in negative territory.And the situation in the French service industries also improved, with the PMI rising to 47.3 from 45.1 in May - but remaining in negative territory.
8.39am: The euro has tumbled to a session low of $1.26573, following the weak German manufacturing figures.8.39am: The euro has tumbled to a session low of $1.26573, following the weak German manufacturing figures.
8.30am: The PMIs are out - well on Twitter anyway. Terrible German manufacturing PMI of 44.7 in June versus 45.2 in May, the weakest since July 2009. Service industries are still expanding, but also weaker, with the PMI at 50.3, down from May's 51.8.8.30am: The PMIs are out - well on Twitter anyway. Terrible German manufacturing PMI of 44.7 in June versus 45.2 in May, the weakest since July 2009. Service industries are still expanding, but also weaker, with the PMI at 50.3, down from May's 51.8.
The immediate reaction on Twitter was "horrid" and "yuck".The immediate reaction on Twitter was "horrid" and "yuck".
8.16am: Brent crude has hit the lowest level in 18 months, tumbling to $92 a barrel, amid fears over world demand. China's manufacturing sector continues to slow and the Fed's latest measures dashed hopes for more aggressive steps to boost the world's largest economy.8.16am: Brent crude has hit the lowest level in 18 months, tumbling to $92 a barrel, amid fears over world demand. China's manufacturing sector continues to slow and the Fed's latest measures dashed hopes for more aggressive steps to boost the world's largest economy.
An unexpected rise in US crude inventories last week also hit Brent, which has slid 28% since reaching a peak above $128 a barrel in March.An unexpected rise in US crude inventories last week also hit Brent, which has slid 28% since reaching a peak above $128 a barrel in March.
China's factories contracted for the eighth month in a row in June with export orders the weakest since early 2009, according to the HSBC flash Purchasing Managers Index, the earliest monthly indicator of China's industrial activity.China's factories contracted for the eighth month in a row in June with export orders the weakest since early 2009, according to the HSBC flash Purchasing Managers Index, the earliest monthly indicator of China's industrial activity.
"Obviously any indication that the Chinese economy is slowing more than expected will put further pressure on oil prices, and commodities," said Michael Creed, an economist at National Australia Bank."Obviously any indication that the Chinese economy is slowing more than expected will put further pressure on oil prices, and commodities," said Michael Creed, an economist at National Australia Bank.
8.08am: European stock markets have opened lower, as expected. The FTSE 100 index in London is off 0.4%, or 23 odd points, at 5598. Germany's Dax has started the day 0.5% lower while France's CAC has shed 0.4%, Spain's Ibex has tumbled 1% and Italy's FTSE MiB has lost 0.6%.8.08am: European stock markets have opened lower, as expected. The FTSE 100 index in London is off 0.4%, or 23 odd points, at 5598. Germany's Dax has started the day 0.5% lower while France's CAC has shed 0.4%, Spain's Ibex has tumbled 1% and Italy's FTSE MiB has lost 0.6%.
Investors are cashing on on a four-day rally after the Fed stopped short of announcing a new round of quantitative easing and China released more weak economic figures.Investors are cashing on on a four-day rally after the Fed stopped short of announcing a new round of quantitative easing and China released more weak economic figures.
On bond markets, the Spanish ten-year yield has edged down to 6.755%, below the 7% danger mark, while the Italian equivalent is at 5.76%.On bond markets, the Spanish ten-year yield has edged down to 6.755%, below the 7% danger mark, while the Italian equivalent is at 5.76%.
7.45am: Here is today's agenda. Spain is in the spotlight again: it will attempt to sell €2bn of two-, three- and five-year bonds around 10am. The expectation is that it will get it all away, but at high yields.7.45am: Here is today's agenda. Spain is in the spotlight again: it will attempt to sell €2bn of two-, three- and five-year bonds around 10am. The expectation is that it will get it all away, but at high yields.
Two independent reports on the country's banking system are expected a few hours later, whereupon Mariano Rajoy's government will make a formal request for bank aid. How much of the offered €100bn will be needed? Some numbers that are being bandied around are in the region of €70bn. Certainly the IMF's estimate of €37bn three weeks ago looks to be wide off the mark.Two independent reports on the country's banking system are expected a few hours later, whereupon Mariano Rajoy's government will make a formal request for bank aid. How much of the offered €100bn will be needed? Some numbers that are being bandied around are in the region of €70bn. Certainly the IMF's estimate of €37bn three weeks ago looks to be wide off the mark.
• Revised June manufacturing and services PMIs for Germany, France and eurozone
• Finland votes on ESM at 8am
• Spain holds €2bn bond auction around 10am
• Spanish bank stress tests
• Eurogroup press conference at 7pm
• Greek cabinet to be unveiled		• Revised June manufacturing and services PMIs for Germany, France and eurozone
• Finland votes on ESM at 8am
• Spain holds €2bn bond auction around 10am
• Spanish bank stress tests
• Eurogroup press conference at 7pm
• Greek cabinet to be unveiled
All times BSTAll times BST
7.35am: Well, this promises to be an interesting day. Welcome back to our rolling coverage of the eurozone debt crisis and world economy.7.35am: Well, this promises to be an interesting day. Welcome back to our rolling coverage of the eurozone debt crisis and world economy.
Greece has a new Conservative-led government under Antonis Samaras, but the US Federal Reserve's extension of Operation Twist last night seems to have fallen flat... To sum it up: Fed twists again, but no QE3 yet.Greece has a new Conservative-led government under Antonis Samaras, but the US Federal Reserve's extension of Operation Twist last night seems to have fallen flat... To sum it up: Fed twists again, but no QE3 yet.
Andrew Taylor, market strategist at GFT, says:Andrew Taylor, market strategist at GFT, says:
The Fed delivered what the majority of the market had priced in but seems now that it is here markets seem unsure of how it was supposed to help.The Fed delivered what the majority of the market had priced in but seems now that it is here markets seem unsure of how it was supposed to help.
Traders who enjoyed a rally on the hopes of Operation Twist are only now calculating that its affects are minimal if anything at all. This programme was definitely not pulled out of the Fed's 'stimulatory' toolbox, in fact, it should have been in a box on the wall that says 'break glass if you are out of solutions'.Traders who enjoyed a rally on the hopes of Operation Twist are only now calculating that its affects are minimal if anything at all. This programme was definitely not pulled out of the Fed's 'stimulatory' toolbox, in fact, it should have been in a box on the wall that says 'break glass if you are out of solutions'.
Spanish bond yields fell sharply yesterday in the wake of speculation that Europe's leaders were thinking about allowing bailout funds to buy bonds directly, even though German chancellor Angela Merkel poured cold water on the idea saying it was "purely theoretical".Spanish bond yields fell sharply yesterday in the wake of speculation that Europe's leaders were thinking about allowing bailout funds to buy bonds directly, even though German chancellor Angela Merkel poured cold water on the idea saying it was "purely theoretical".
Michael Hewson, senior market analyst at CMC Markets UK, says:Michael Hewson, senior market analyst at CMC Markets UK, says:
The idea will certainly be on the agenda at the start of today's two day EU finance ministers meeting, but it is a long way from being a work in progress, simply because the new ESM doesn't even exist yet.The idea will certainly be on the agenda at the start of today's two day EU finance ministers meeting, but it is a long way from being a work in progress, simply because the new ESM doesn't even exist yet.
Markets are eagerly awaiting a Spanish bond auction of €2bn of two-, three- and five-year bonds later this morning, as well as two reports on Spanish banks that should shed light on how much of the mooted €100bn bailout will be needed to recapitalise the sector. The €37bn figure suggested by the IMF earlier this month certainly looks much too low.Markets are eagerly awaiting a Spanish bond auction of €2bn of two-, three- and five-year bonds later this morning, as well as two reports on Spanish banks that should shed light on how much of the mooted €100bn bailout will be needed to recapitalise the sector. The €37bn figure suggested by the IMF earlier this month certainly looks much too low.