1600 The European Commission is widening its regulatory sweep to include “shadow” banking, heralding new controls over the sprawling and largely unchartered €46 trillion (£38 trillion) sector blamed for helping trigger the financial crisis.
The EU’s executive launched a consultation with industry today with a view to writing rules to control shadow banking, a term describing activity resembling banks’ basic borrow-and-lend model, but often taking place beyond the watch of regulators.
It opens up a new front in the regulatory drive of Brussels, which some analysts believe has been slow to tackle the causes of a financial crisis that struck Europe roughly five years ago.
“What we do not want is for financial activities and entities to circumvent existing and foreseen rules, allowing new sources of risk to accumulate in the financial sector,” said Michel Barnier, the EU official in charge of regulatory reform.
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“That is why we need to better understand what shadow banking actually is and does, and what regulation and supervision may be appropriate.”
Political leaders are aware of the potential problem that shadow banking presents and the Group of 20 top global economies have asked their task force, the Financial Stability Board (FSB), to come up with plans to regulate the sector.
1500 Greece’s economic output will contract by a further 4.5 per cent this year ahead of a possible rebound in 2013, the Bank of Greece said in an annual report today.
“The recession is expected to continue in 2012,” the Bank said, adding that the economy, now in a fifth year of recession, shrank by 6.9 per cent in 2011.
The unemployment rate rose to 17.7 per cent and is expected to exceed 19 per cent this year.
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Greek bank deposits fell by around €35 billion during the year, and the rate of bad loans rose to 14.7 per cent by the end of September from 10.5 per cent at the close of 2010.
Despite a wave of austerity measures imposed in return for bailout loans from the EU and IMF, the budget deficit had come in at 10.6 per cent in 2011, the Bank said.
1400 Brent crude oil traded above $125 (£79) on Monday as tension over Iran’s nuclear programme supported prices, offsetting an increase in oil exports from Libya and a rise in production by Saudi Arabia.
The threat of military action against Iran, the world’s fifth largest oil exporter, has unnerved energy markets and sent oil prices soaring, with Brent nearly 17 per cent higher since the start of the year.
1315 Apple will start paying a quarterly dividend for the first time since 1995 and buy back $10 billion (£6.3 billion) of shares as the technology giant begins to spend some of its $100 billion cash mountain.
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The company said that it would initiate a quarterly dividend worth $2.65 a share in the fourth quarter of this financial year. The share repurchase programme will take place over the next three years.
Apple said that the “primary objective” was “neutralising the impact of dilution from future employee equity grants and employee stock purchase programmes”.
It said: “Even with these investments, we can maintain a war chest for strategic opportunities.”
1300 The adult rate of the minimum wage is to rise by 11p to £6.19 an hour from October, Vince Cable has announced.
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However, the Business Secretary said that the rates for younger workers will be frozen at £4.98 for 18 to 20-year-olds and £3.68 for 16 to 17-year-olds. Apprentices will enjoy a 5p increase in their minimum wage to £2.65 an hour.
The changes are in line with the recommendations of the independent Low Pay Commission and come into effect on October 1.
Dr Cable said: “I believe that the recommendations of the Low Pay Commission strike the right balance between pay and jobs, and have therefore accepted all the rate recommendations. The Low Pay Commission has done a good job in difficult circumstances.
“In these tough times freezing the youth rates has been a very hard decision - but raising the youth rates would have been of little value to young people if it meant it was harder for them to get a job in the long run.”
1245 George Osborne will announce plans for an “aggressive” crackdown on stamp duty avoidance by the super-rich on Wednesday in a Budget that he claims will be aimed at “working people”.
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The Chancellor’s pledge on stamp duty comes amid reports that rock stars, including Sir Mick Jagger and Bob Geldof, are denying Britain more than £1 billion a year in tax by placing properties into offshore companies.
Mr Osborne described the practice yesterday as “completely unacceptable” and said that he would come down on it “like a ton of bricks”. Anyone buying a house to live in will have to pay the tax, however they structure the purchase, under new rules that are expected to raise about £200 million.
1215 Investors took money off the table today as London’s top flight index struggled to make headway after decent gains on Friday. A recent flourish, which has been driven by hopes of a sustained economic recovery in the United States and an easing in the eurozone crisis, has taken the FTSE 100 Index to its highest level since last summer.
However, it fell today - down 20 points to 5,945 - amid a quiet session for corporate news and expectations that there will be little in the way of US economic releases to drive trading.
Lingering concern about the strength of Chinese demand, following a fresh fall in the country’s house prices, also put pressure on stocks.
There was a mixed session for financial stocks, with Lloyds Banking Group among the fallers amid fears its deal to sell 632 branches to the Co-op will be stymied by regulatory concerns over the running of the enlarged business. Lloyds shares were 0.1p lower at 37.4p, while other fallers included HSBC, which dropped 4.9p to 575.45p, and Barclays after a decline of 2p to 252p. However, Royal Bank of Scotland bucked the trend by climbing 0.2p to 28.3p.
In the telecoms sector, Vodafone rose 0.6p to 166.9p amid speculation it stands to gain a £1 billion tax benefit if it beats off competition from Tata Communications and pulls off a deal for Cable & Wireless Worldwide.
BT shares were 2.25p higher at 217.85p after reports suggested that the company would put up to £1.5 billion into its pension fund in order to tackle a huge shortfall in the scheme. The early payment to cut the deficit would trigger a better rate of tax relief as the Government is reducing the corporate tax rate from 26 per cent to 25 per cent in April.
1100 Evangelos Venizelos, the Greek Finance Minister, is to submit his resignation after being elected to head the majority Socialist party as the country heads into early general elections.
Mr Venizelos was the only candidate for the leadership of the PASOK party in Sunday’s elections, and will officially take over from his predecessor, the former Prime Minister George Papandreou, today.
The Greek minister has played a central role in recent months in negotiating a second bailout for Greece coupled with new austerity measures.
The announcement comes only days after eurozone countries approved a €28 billion loan for the country and the coalition Government has yet to indicate who will be appointed in Mr Venizelos’s place.
1030 Eurozone bank-to-bank lending rates hit fresh 20-month lows today as the huge amount of liquidity supplied by the European Central Bank in recent months exerted heavy downward pressure on the money market.
Euribor rates, which eurozone banks charge to lend to each other, have dropped by more than a third as a result of the €1 trillion in cheap three-year loans that the ECB has poured into the financial markets since December.
Three-month Euribor rates fell to 0.842 per cent today, the lowest level since July 2010.
1000 Hopes for an investment-led recovery suffered a setback with the release of figures showing that companies have pared back their spending plans sharply for the coming year.
A survey by GE Capital shows that small and medium-sized enterprises (SME) have cut back their annual investment plans by more than half in the past six months. However, companies are less conservative when it comes to hiring, with SMEs signalling they are ready to create about 378,000 new jobs over the next 12 months, according to the report.
George Osborne, who presents his third Budget on Wednesday, is counting on British companies to start drawing from their £700 billion cash surplus and splashing out on new plants and premises as the Government cuts back its own capital expenditure.
0930 The President of Ecuador has said that his country will welcome back with open arms any of its citizens who migrated to Spain but are now finding it tough to survive because of the European country’s recession.
Rafael Correa made the comments in Murcia, an eastern Spanish region and home to 45,000 Ecuadoreans, a figure that amounts to about 22 per cent of those from the Latin American country living in Spain.
Mr Correa announced that “Ecuador is changing for the better” as those who emigrated to Spain are facing hard times, with unemployment at 23 per cent.
Ecuadorean immigrants who entered the country in search of construction work are among the hardest hit.
0915 Sam Fleming, Economics Editor, writes in The Times today: They were dubbed the Sleeping Beauties — bonds that would remain locked away for a century before being repaid.
In 1993, the Walt Disney Company sold $300 million of corporate paper maturing in 2093. The fundraising by the House of the Mouse, meant in part to pay for its theme parks, was an audacious one, sealing in for decades the unusually low borrowing costs of the time.
Investors lapped the Beauties up, but America’s bond market was not destined to remain in a state of somnolence for long. The following year, traders were jolted awake as the Federal Reserve started increasing its key interest rate.
Yields on US Treasuries spiked horribly as investors fled, spooked by the spectre of inflation, in a bear market that is still remembered with a grimace on Wall Street.
George Osborne had his own Once upon a Dream moment last week, floating the idea of a 100-year gilt. The Treasury’s cost of borrowing has not been this low since Victorian times. Given the propitious circumstances, the Chancellor, it seems, hopes to lock low rates in for generations to come.
0900 European markets have opened down this morning after a positive end to last week, despite an announcement that the Greek economy is making progress.
The FTSE 100 in London has slipped by 0.5 per cent or 30 points to 5,935, Frankfurt’s Dax has fallen 0.64 per cent and the CAC-40 in Paris has dropped 0.8 per cent.
0800 Lucas Papademos, the caretaker Prime Minister, is confident that Greece is “more than halfway along the path to economic recovery – although the fiscal consolidation process will last longer”.
In an interview with the Financial Times, he said: “Positive growth rates should be achieved within less than two years.”
He admitted, however, that Greece might need more outside support if it were unable to return to financial markets by 2015.
0720 The chief executive of the fund manager Pimco, Mohamed El-Erian, expects Portugal to need a second rescue because its existing €78 billion (£65 billion) package is insufficient.
“Then there will be a big debate about how to split the burden between the EU, creditors, the IMF and the European Central Bank. And then financial markets will become nervous because they are worried about private sector participation,” he said.
Asked whether he expected Portugal to have become the next Greece by the end of this year, Mr El-Erian told the German weekly Der Spiegel: “Yes, unfortunately that will be the case”.
Portugal’s economy is forecast to contract by 3.3 per cent this year - its deepest slump since the 1970s.
Mr El-Erian, also co-chief investment officer of Pimco, said that this year would show whether the eurozone will fall apart or become a smaller but stronger entity, with the first option being “less likely but definitely not to be ruled out”.
He expected the eurozone could emerge from its crisis very quickly if its members“finally took the initiative”.
“There is a lot of money waiting on the sidelines to see what happens. A lot of money,” he said, adding executives would start investing again as soon as there was clarity on how the situation in the eurozone will develop.
0530 Benchmark oil remained above $107 per barrel today, while the dollar was slightly higher against the euro and the yen in Asia.
Rising oil prices dented the outlook for airlines, whose fortunes are closely linked to the cost of fuel. Taiwan’s EVA Airways fell 2.5 per cent and Korean Air Lines Co. was down 2.4 per cent.
Benchmark oil for May delivery was up 24 cents to $107.30 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.95 to finish at $107.06 per barrel.
The euro fell to $1.3166 from $1.3171 late Friday in New York. The dollar rose to 83.39 yen from 83.36 yen.
0405 Asian stock markets inched higher today as good news about the US economy helped to maintain enthusiasm for riskier assets while a weaker yen improved the outlook for some of Japan’s companies.
The Nikkei 225 index in Tokyo continued its recent upward march, adding 0.2 per cent to 10,146.64. The Nikkei has risen four sessions in a row and closed at a seven-month high Friday.
Hong Kong’s Hang Seng index gained 0.1 per cent to 21,353.32 and South Korea’s Kospi rose 0.4 per cent to 2,042.18. Australia’s S&P ASX/200 climbed 0.5 per cent to 4,296.30.
The main indices in Singapore and Indonesia were higher, while mainland China was mixed. Taiwan, New Zealand and the Philippines fell.
There was plenty of good economic news last week in the US. Unemployment claims fell to 351,000 — matching a four-year low. The Federal Reserve signalled that the economic recovery was gaining steam.
The Dow Jones industrial average is up by 8.3 per cent this year, and the Nasdaq broke through 3,000 for the first time since the dot-com days more than a decade ago.
0315 Oil prices have extended gains in Asia, supported by concerns over Middle East supply and signs of stabilisation in the world economy.
New York’s main contract, West Texas Intermediate (WTI) crude for delivery in April, gained 24 cents to $107.30 a barrel while Brent North Sea crude for May settlement was up 18 cents at $125.99 in morning trade.
On Friday, WTI crude advanced $1.95 at its close and Brent crude surged a hefty $3.21.
0240 The Australian share market has climbed higher, boosted by the resources sector.
At the lunch break the S&P/ASX200 index was up 27.3 points, or 0.64 per cent, at 4,303.5 points, while the broader All Ordinaries index had lifted 27.9 points, or 0.64 per cent, to 4,392.6 points.
0200 Hong Kong stocks opened 0.31 per cent higher, despite the latest data from the United States failing to provide a clear picture on the health of the US economy.
The Hang Seng Index rose 67.01 points to 21,384.86 in the first minutes of trade
0030 Japan’s Nikkei share average gained today, supported by buying of blue chip laggards as market players looked for fresh proof of a US economic recovery before pushing the index higher.
The Nikkei added 0.2 per cent to 10,150.72 after logging its sixth straight week of gains last week. The broader Topix advanced 0.2 per cent to 868.26.
0015 Australian shares edged higher this morning, boosted by mining and energy stocks, but stopped short of testing three-week highs above 4,300 in a resistance zone that has repeatedly capped the market this year.
Soon after opening, the S&P/ASX200 index was up 14.6 points, or 0.34 per cent, at 4,290.8. The index rose by 1.5 per cent last week, though Friday saw a small decline.
The broader All Ordinaries index was up 15.8 points, or 0.36 per cent, at 4,380.5.
New Zealand’s benchmark NZX 50 index fell 0.1 per cent to 3,502.6.
Last week: Wall Street stocks closed mixed on Friday after a slate of US data reports delivered more murky signals than clarity about the direction of the economy.
At the closing bell,the Dow Jones industrial average was down 20.14 points, or 0.03 per cent, to 13,232.62.
The S&P 500 gained 1.57 points (0.11 per cent) to 1,404.17.
The tech-heavy Nasdaq Composite lost 1.11 points (0.04 per cent) to 3,055.26.
Meanwhile, Europe’s main stock markets drifted higher and the euro rose as investors tracked mixed data from the US and took confidence over developments in the Greek debt crisis.
London’s FTSE 100 added 0.42 per cent to 5,965.58 points, the CAC-40 added 0.41 per cent in Paris to 3,594.83 points and in Frankfurt the DAX 30 rose 0.19 per cent to 7,157.82 points.
Amsterdam rose by 0.31 per cent, Milan by 0.52 per cent, Brussels by 0.94 per cent and Zurich by 0.14 per cent. Lisbon fell by 0.37 per cent.
The European single currency rose sharply to $1.3179 from $1.3082 late in New York on Thursday.
0000 Welcome to rolling coverage from our Business and Foreign staff of the market turmoil and the latest on the world debt crisis. We will keep this blog updated as markets open and close around the world.