1615 Silvio Berlusconi, the former Italian prime minister, has suggested that Italy leave the euro unless the European Central Bank (ECB) agrees to pump more cash into the economy and guarantee government debts.
Writing on his Facebook page today he said: “We have to go to Europe and say forcefully that the ECB should start printing money. Otherwise, if it doesn’t, we should have the strength to say ‘ciao, ciao’ and leave the euro, while remaining in the EU, or to say to Germany that it should leave the euro if it doesn’t agree. My ‘crazy idea’ is that the Bank of Italy should print euros or print our own currency.”
1550 The fact that the US unemployment rate rose for the first time in 11 months is troubling news for President Barack Obama, whose prospects of winning re-election in November could hinge largely on the health of the American economy.
Mitt Romney, the Republican candidate who will challenge Mr Obama for the presidency, wasted no time in jumping on the data to criticise the President’s economic policies. “Today’s weak jobs report is devastating news for American workers and American families,” Mr Romney said in a statement, calling the report “a harsh indictment of the president’s handling of the economy.”
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1530 Markets have taken a tumble this afternoon following data released from the US showing weaker-than-expected jobs growth (See 1330) and news of poor manufacturing output throughout Europe. London’s FTSE 100 share index has fallen 1.26 per cent, or 66 points, to 5,254, while Frankfurt’s DAX has lost more than 3 per cent and the CAC 40 in Paris has dipped 2 per cent.
The Dow Jones Industrial Average lost 1.59 per cent in early trading to 12,195 points and the IBEX, Spain’s equivalent of the FTSE 100, has also dropped 1.2 per cent.
1500 Ireland’s voters have agreed to ratify the European Union’s fiscal treaty with “yes” votes reaching 60 per cent, official results show. Leading Irish opponents of European austerity apparently conceded defeat even before all ballots were counted.
Approval to the deficit-tightening measures will relieve pressure on EU financial chiefs as they battle to contain the eurozone’s debt crisis. However critics say that tougher rules will do nothing to stimulate growth in bailed-out Ireland, Portugal and Greece, nor stop Spain or Italy from requiring aid.
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1430 The decision by trade insurers this week to stop covering exporters shipping to Greece could have “alarming” consequences, exacerbating shortages and pushing up prices for consumers, the country’s retail federation said today.
“Insurance companies contribute significantly to the creation of a climate of security and trust in the market,” the National Confederation of Greek Commerce (ESEE) retail lobby said.
“This development has extremely alarming — if not catastrophic — consequences for trade and domestic industry,” it said, adding that imports of raw materials and machinery would be worst affected. ESEE’s warning came as the world’s second-biggest trade credit insurer, Atradius, said that it, too, has stopped covering new Greek export shipments due to fears that the nation could be forced out of the single currency.
1330 The figures are out from the US and growth in the jobs market in May was the weakest in a year, with employers adding far fewer positions in the prior two months than previously reported, suggesting that the economic recovery may be faltering.
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Employers created a paltry 69,000 jobs last month, the Labor Department said today, the fewest since May last year. In addition, employers added 49,000 fewer jobs than previously estimated in March and April. The unemployment rate rose to 8.2 per cent from 8.1 per cent.
1300 The German Government has shifted its stance in favour of a European Commission proposal to give Spain more time to reduce its budget deficit. The commission yesterday called for an extension of one year for the country to make the cuts demanded of it as its economy is forecast to be in recession this year and next.
The shift suggests that Berlin is prepared to take a more flexible approach to tackling the financial crisis in Europe as until now it has reacted coolly to any measures that dilute austerity drives. “Spain presented a stability programme in which it stated its clear intention to reach the 3 per cent threshold in 2013,” said Johannes Blankenheim, the German finance ministry spokesman, adding that Germany supports Spain in its efforts to implement the necessary measures but that “we also recognise that because of negative economic developments it will be difficult for Spain to reach its goals.”
1240 European stock markets have slumped ahead of key US jobs data and following weak manufacturing and employment numbers out of China and the eurozone. London’s FTSE 100 share index is down almost 1 per cent, or 48 points, to 5,272, while Frankfurt’s DAX has plunged 2.75 per cent and the CAC 40 in Paris has slipped 2 per cent.
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1200 The head of Greece’s Radical Left Coalition, whose strong gains in last month’s elections deepened concerns over his nation’s economic future, today vowed to cancel his nation’s international bailout agreement if he gains power.
Alexis Tsipras, whose party came second in inconclusive Greek polls on May 6, said there was no way to partially implement the terms of the bailout. Presenting his Syriza party’s economic program, he said he would seek to repeal the bailout terms, which have included deep spending cuts and stiff tax hikes and have been blamed for a prolonged recession.
The country, crippled with debt, holds its second election in six weeks on June 17. It was called after the New Democracy party won the previous poll in May, but without enough votes to form a government, and coalition talks collapsed.
1115 It has been confirmed — Mario Monti’s office has released a statement saying that the leaders of Italy, France, Germany and Spain will meet in Rome on June 22. The announcement from the Italian Prime Minister puts the long-anticipated meeting just a few days ahead of a crucial June 28 European summit.
Mr Monti, François Hollande, French President and Mariano Rajoy, the Spanish Prime Minister, have been pressing for pro-growth policy steps to balance the budget rigour preached by Angela Merkel, the German Chancellor.
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1040 Brent oil prices have sunk under $100 per barrel for the first time in eight months, hit by weak Chinese manufacturing data and the continuing eurozone debt tensions centred on Spain. Brent North Sea crude tumbled $2.27 to strike $99.60 a barrel, which was the lowest level since October 4, 2011.
1015 Following some awful manufacturing figures from Britain and across the eurozone, along with Italy’s record level of unemployment (see 0930), comes more bad news as the jobless figure for the eurozone in March and April rose to the highest level since the EU began tracking the data for the single currency area.
Around 17.4 million people were out of work in the 17-nation zone in April, or 11 per cent of the working population, the highest level since records began in 1995, according to Eurostat, the EU’s statistics office.
1000 Ireland’s Government is confident after early counting that voters have backed a referendum on the European Union’s new fiscal treaty. While the German-led plan for stricter budget rules needs the approval of only 12 of the 17 eurozone countries to be ratified, an Irish rejection would undermine one of Europe’s key initiatives just as problems mount in Spain and Greece.
“We are very, very confident. We’ll have to wait another half an hour to see how the tallies are looking, but so far so good,” Ireland’s European affairs minister Lucinda Creighton told Reuters while watching votes being counted in Dublin.
0950 British manufacturing activity shrank at its fastest pace in three years in May as a broad-based global economic slowdown hit demand for British goods, according to a survey released this morning.
The PMI index suggests that the sector is continuing to drag on the UK economy which is mired in its second recession in two years, and may add to pressure on the Bank of England to act to ward off the threat of a protracted eurozone-led downturn. The news is also likely to fuel calls for Britain’s Conservative-led coalition Government to find new ways of boosting growth in Britain as it presses ahead with austerity plans.
The headline PMI activity plunged to 45.9 in May from a downwardly revised 50.2 in April, its lowest reading since May 2009 and the second-steepest fall in the survey’s 20-year history.
The eurozone’s manufacturing sector as a whole contracted at its steepest pace in nearly three years last month as confidence takes a beating and new orders continue to dry up. PMI dropped to 45.1 from 45.9 in April, slightly above a preliminary reading but marking its lowest reading since June 2009.
0930 Italy’s seasonally adjusted unemployment level rose in April to 10.2 per cent, the highest since the monthly series began in January 2004.
Some 28,000 jobs were lost in April from the previous month, national statistics institute ISTAT is reporting. “The data paint a worrying picture, with a fall in employment and a rise in the jobless rate,” a spokesman said.
March’s adjusted jobless rate was sharply revised up to 10.1 per cent from a previously reported 9.8 per cent. Youth unemployment in April eased to 35.2 per cent from a record high of 35.9 per cent the month before. The overall adjusted employment rate in April stood at 57 per cent, stable from the month before.
ISTAT reported that the unadjusted jobless rate also rose in April to 11.1 per cent, compared with 7.9 per cent in April 2011.
0915 Mario Monti, the Italian Prime Minister, has said that his country is threatened by “huge possibilities” of contagion, and that pressure from rising sovereign bond yields could complicate reforms.
“It is obviously a difficult place to be in, when you have a country displaying massive and concentrated efforts of consolidation and structural reforms, which are obviously politically and socially costly, and sees its position threatened by huge possibilities of contagion,” he said.
Mr Monti warned of a popular backlash if investors demanded deeper fiscal cuts and budget discipline beyond what was already being undertaken.
0915 Graham Keeley in Madrid: Soraya Sáenz de Santamaría, the 40-year-old Spanish Deputy Prime Minister, said that the US favoured a debt rescue plan which would involve Spanish banks seeking direct help from the EU, rather than a bailout of the Spanish state agreed by the entire EU, according to reports in the Spanish media.
However this would involve a change in rules governing aid to particular countries. The IMF has also denied reports it was preparing a €300 billion loan to Spain.
Ms Santamaría was speaking after meetings in Washington with Christine Lagarde, IMF director general, and US Treasury Secretary Timothy Geithner.
0900 More ammunition for those arguing that Germany is benefitting from the current financial crisis in the eurozone with figures out today showing that the country’s exports are up 5.8 per cent in 2012’s first quarter over the same period last year.
Within the key European Union market as a whole, and in those European nations worst hit by the turmoil, the export figures are continuing to fall sharply.
The Federal Statistical Office reports that Germany’s exports grew to €276 billion in the first quarter compared to €261 billion in 2011’s first quarter. Exports within the European Union grew 2.2 per cent to €161 billion, and only 0.9 per cent to the other 16 countries using the single currency to €107 billion.
0840 Falling demand both at home and abroad has caused Spain’s manufacturing slump to deepen this month, with output shrinking at the fastest rate in three years while Europe’s biggest jobless total continues to climb.
Markit’s Purchasing Managers’ Index (PMI) of manufacturing companies stood at 42.0 in May, down from 43.5 in April — the lowest level since May 2009, when Europe began to emerge from the first stage of the financial crisis.
The measure has not exceeded the 50 line separating growth from contraction since April of last year.
0830 Europe’s leading stock markets are mixed at the start of trading this morning as investors await key US jobs data amid continuing anxiety in the eurozone. London’s FTSE 100 share index climbed 0.5 per cent or 27 points to 5,320, in Paris the CAC 40 also gained 0.2 per cent while Frankfurt’s DAX dipped 0.21 per cent.
0815 Sam Fleming, Economics Editor, writes: Angela Merkel insisted that there were “no taboos” in the battle to shore up the euro as Germany came under mounting pressure to defend the currency and the flight of investors from Spain accelerated.
The German Chancellor said that the EU should be ready to consider all options to halt the crisis, amid demands for greater integration including in the region’s banking system.
Her words came as Mario Draghi, the President of the European Central Bank, warned that his institution could not fill the vacuum being left by political inaction at a European level.
0800 German government bonds — known as bunds — tested record highs today as fears that Spain may need external help to shore up its troubled banking sector continue to trouble markets.
Spanish bond yields surged this week to close to their highest level since the launch of the euro, raising questions about the country’s ability to fund itself over the longer-term. Investors are today looking to safe-haven German bonds ahead of the weekend to avoid exposure to losses should policy makers take crucial steps to curtail the current financial crisis in the region.
Here’s a recap of the eurozone’s ten-year government bond figures today:
0730 Asian shares and the euro extended losses this morning, with Japan’s Nikkei logging its longest weekly losing streak in two decades, as weak Chinese factory data highlighted concerns that the euro zone debt crisis will further undermine global growth.
The data came amid escalating worries about Spain’s banking system and the fate of Greece within the euro bloc that have spurred a flight to safe-haven assets, boosting the dollar and the yen while pushing dollar-sensitive commodities lower.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell as much as 1.1 per cent before paring some losses to stand down 0.5 per cent, on track to eke out a weekly gain after three straight weeks of losses.
European shares were seen mixed, with spreadbetters’ predictions for major European markets ranging from a drop of 0.2 per cent to a rise of 0.3 per cent. US stock futures were down 0.5 per cent.
Shares in Australia, which is highly dependent on demand from China, also slipped as much as 1.1 per cent before paring most losses for a decline of 0.3 per cent.
Hong Kong shares, however, rose largely on short-covering in financials although most cyclicals such as materials and mining firms were weak on the disappointing Chinese manufacturing data.
China’s official purchasing managers’ index (PMI) fell to 50.4 in May from April’s 13-month high of 53.3, weakness that was confirmed by a separate HSBC’s PMI survey showing a seventh consecutive month of contraction in the manufacturing sector, signalling a steeper-than-expected deterioration in demand at home and abroad.
The euro hit a fresh 23-month low against the dollar at $1.2324 and the Australian dollar fell to an eight-month low around $0.9650.
Japan’s Nikkei slid 1.3 per cent, undermined by a yen strengthening on Europe’s debt woes, on track to fall 1.8 per cent on the week for its ninth straight week of losses.
“The problem is that although Japanese stocks are technically cheap according to past barometers, the market has always moved more on foreign factors than domestic ones,” said Yutaka Miura, senior technical analyst at Mizuho Securities.
US crude fell 0.1 per cent to $86.46 a barrel after marking its biggest monthly decline since December 2008 in May. Brent crude futures eased 0.1 per cent to $101.82.
Spot gold fell 0.3 per cent to $1,557.54 an ounce on the sluggish euro. But Niimura and other analysts said the eurozone’s deepening crisis will eventually draw investors back to bullion, a traditional alternative investment in times of crisis.
0515 Motor racing business Formula One Group has decided to delay its initial public offer on the Singapore stock exchange, dropping plans to lodge a prospectus with regulators there next week, a source familiar with the decision said this morning.
The source, who was not authorised to speak publicly on the matter, said the offer, worth up to $3 billion, had not been abandoned altogether but would not be going ahead for “some time”. Weak markets have hit planned IPOs hard, with luxury jeweller Graff Diamonds pulling its offer yesterday.
Formula One, whose major shareholder is private equity firm CVC Capital Partners, was in pre-marketing mode and had been planning to launch a preliminary prospectus with the Monetary Authority of Singapore next week.
0510 In Asian markets this morning: Stock markets fell today, stunted by weakness in Chinese manufacturing that suggests the slowdown in the world’s second largest economy may worsen.
The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, fell 2.9 per cent to 50.4 per cent in May, just above the 50 level that signifies expansion. The index was at 53.3 in April.
New orders weakened more than 4 per cent while inventories rose and prices softened due to weaker demand.
Japan’s Nikkei 225 index fell 0.7 per cent to 8,479.12 and South Korea’s Kospi dropped 0.2 per cent to 1,839.73. Australia’s S&P/ASX 200 index lost 0.3 per cent to 4,064.20. Benchmarks in Indonesia and New Zealand were also lower.
But Hong Kong and mainland Chinese shares rose in tandem with investor hopes that China will now launch more measures to help its economy. Hong Kong’s Hang Seng added 0.3 per cent to 18,682.60.
“The data is so bad, and so clearly points to slowdown of growth momentum, that it will likely help convince policy makers that the economy needs more stimulus,” Dariusz Kowalczyk, senior economist at Credit Agricole CIB in Hong Kong, said in an email.
“We still do not expect announcement of a big number ‘package’ like during the Lehman crisis, but rather a series of measures to stimulate infrastructure spending and lending.”
The euro fell to a fresh two-year low of $1.2324 after China’s PMI came in below expectations, sending risk currencies such as the euro and the Australian dollar lower.
In the US yesterday, stock markets were lower after the government said the number of people applying for unemployment benefits rose to a five-week high, and that the economy grew at an annual rate of 1.9 per cent in the first three months of the year, below its earlier estimate of 2.2 per cent.
Weekly applications for unemployment aid rose 10,000 to 383,000, the Labor Department said.
The Dow Jones industrial average fell 0.2 per cent to 12,393.45. The Standard & Poor’s 500 index fell 0.2 per cent to 1,310.33. The Nasdaq composite index fell 0.4 per cent to 2,827.34.
Benchmark oil for July delivery was down 29 cents to $86.24 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.29 to settle at $86.53 in New York yesterday.
The dollar rose to 78.47 yen from 78.33 yen.
0505 David Charter in Berlin writes: The International Monetary Fund denied reports yesterday that it had begun planning a bailout for Spain as speculation mounted that the country was on the verge of asking for the biggest financial rescue in history.
Initial planning was said to have started at the IMF’s European department, reversing the slide of US stocks this week over fears of a banking collapse in Spain.
The three-year rescue plan, a combination of IMF and EU loans, could total €300 billion (£240 billion) if Spain’s international borrowing costs continued to rise, sources said.
Spain’s most pressing need is to find €10 billion to bail out Bankia, the country’s third biggest bank, which the Government pledged to rescue. It will need €19 billion to stay afloat but the Government has only €9 billion in its bailout pot.
Gerry Rice, the IMF spokesman, said that it was not drafting any plans for a Spanish bailout and that a routine annual review of the country would start on Monday. “The IMF is not drawing up plans that involve financial assistance for Spain, nor has Spain requested any financial support from the IMF,” Mr Rice said.
The US stock market continued to climb, despite the denials, as traders detected a familiar pattern reminiscent of the build-up to the Greek and Portuguese bailouts.
0500 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.