The latest business and finance news, as SNB takes fresh measures to weaken the franc following the Russian rouble crisisLunchtime summary: Rouble ripples reach SwitzerlandSNB imposes negative rates to weaken the francQ&A: Negative rates explainedWhat the experts say 3.29pm GMT More from the Reuters interview with Alexis Tsipras, who said he would indeed cancel austerity programmes agreed by the current government if his Syriza party is elected, but would negotiate debt relief with its lenders. Reuters reports:Saying he was committed to keeping Greece in the euro, Tsipras told Reuters that Europe should cut or erase a big chunk of Greek debt. He said loans from the IMF must be paid but he would seek an extension to maturities on bonds held by the ECB.Syriza - which is expected to win if early elections were held now - has long said it would cancel Greece’s EU/IMF bailout and demand debt relief if it came to power but the comments were the first time Tsipras has clearly spelled out the party’s plan for debt renegotiation. 3.18pm GMT Over in Greece, the Athens stock market has regained some ground after Reuters reported that the leader of opposition party Syriza wanted to keep the country in the euro if he won any forthcoming election.The government’s decision to bring forward a presidential poll which, if it loses, could cause snap elections raised the prospect of Syriza gaining power. This rattled investors, since its leader Alexis Tsipras stands against the austerity associated with the Greek bailout package and seemed likely to rip up the deal or leave the European Union. 3.10pm GMT The latest Philadelphia business survey has also disappointed.The index of current activity dropped sharply from 40.8 in November to 24.5 compared to estimates of a level of 26. But firms were generally optimistic about the future, although there were worries about employment and rising healthcare costs. 2.56pm GMT And here’s some less good news from the US economy, which ironically eases the pressure on the Federal Reserve to raise rates and therefore will probably be received positively.The US services sector expanded in December at its slowest rate since February, with the Markit initial purchasing managers index coming in at 53.6, down from 56.2 in November and well below expectations of a rise to 56.9 according to a Reuters poll.The extent of the slowdown suggests that economic growth in the fourth quarter could come in below 2% which, with the exception of the downturn caused by adverse weather in the first quarter, would be the worst performance for two years. Is the Fed (and almost everyone else) being too optimistic on US economic growth? http://t.co/b4SBsr51nf pic.twitter.com/vqynBLnGoVNot a pretty Flash Services PMI pic.twitter.com/wrFSQO6cVKMarkit Service PMI 53.6, Exp. 56.3, "weakest since the weather-related slowdown in February." - buy everything 2.45pm GMT The US markets have opened and the Dow Jones Industrial Average is currently up more than 1%, as investors continue to warm to the Federal Reserves desire to be “patient” about raising US interest rates.With the dollar down and oil steadying, markets are rallying after their recent downward dip. Concerns that an early US rate rise could help derail global growth have eased, helping the overall mood. 2.31pm GMT On the corporate front Aer Lingus shares have soared on reports that British Airways owner IAG may be interested in bidding.Aer Lingus is up nearly 9% at the moment, valuing the business at around €1bn, following the FT story. 2.17pm GMT If you are in need of a diversion over the next few days, you could try our bumper business Christmas quiz, which you can find here. 1.52pm GMT Following last night’s US Federal Reserve meeting which hinted at interest rises next year as the economy recovers, there is some more upbeat data.The number of Americans filing new unemployment benefit claims fell unexpectedly last week, dropping by 6,000 to a seasonally adjusted 289,000. This was lower than the 295,000 expected by economists, and down from 295,000 the previous week (revised from 294,000). 1.41pm GMT The surprise Swiss move to introduce negative interest rates could be a sign that the European Central Bank will proceed with some form of quantitative easing next month, says Kathleen Brooks at Forex.com.There are some fundamental reasons for the move, she said:Cutting rates is justified to bring Switzerland out of deflation. Its annual rate of inflation is -0.1%, however this could fall further after producer and import prices slid 1.6% year on year last month. The Swiss National Bank’s Jordan gave explicit reasons for the cut in rates: to weaken the Swissie, to overcome deflation [and] to help spur growth, which is expected to be on the weak side in the first quarter.While the internal factors justify the SNB’s actions, the timing of the move was surprising. The market had expected a move on rates sometime in January; however recent market volatility, and the sell-off in the rouble, threatened the 1.20 peg in euro/franc, which triggered this move. Other external factors included the ECB and the Fed. 1.15pm GMT Time for a recap.Switzerland’s central bank has imposed negative interest rates on bank deposits for the first time since the 1970s, as the Russian currency crisis causes ructions around the globe.“Rapidly mounting uncertainty on the financial markets has substantially increased demand for safe investments.The worsening of the crisis in Russia was a major contributory factor in this development.”UBS said on Thursday that it has no plans to levy negative interest rates on its retail clients 12.41pm GMT Germany’s finance minister, Wolfgang Schauble, has offered Greece an olive branch - telling MPs in Berlin that its economy is in better shape then expected.“Reforms are beginning to bear fruit for the people of Greece. The labour market reforms have made the country more competitive ... This year Greece will have a budget deficit within European Union rules.” 12.25pm GMT Over in Greece, the political wheels are turning after MPs rejected the government’s nominee for the presidency last night, increasing the chance that the administration could collapse. “I confirmed my view which is categoric: early elections, required in the case of parliament’s inability to elect a president of the republic, will lead the country into turmoil whose end result will be to find ourselves out of the Eurozone.”“At this point, the widest possible consent is required. We all have to put the interests of the country above personal or party interest. We owe it to the Greek people from whom we have asked huge sacrifices.” “He asked me to come to a solution of consent in the name of national policy. We believe that a national solution will be found only after elections.” 11.57am GMT Imposing negative interest rates on commercial bank deposits could actually backfire on the Swiss economy and cause an asset bubble.So warns Angelo Ranaldo, Professor of Finance and Systemic Risk at the University of St Gallen.“By introducing negative interest rates, the Swiss National Bank is reacting to the European Central Bank’s recent decision and to the renewed pressure on its safe haven currency thanks to the Russian crisis. But there is a fundamental disconnect between the Swiss economy and the outlook for the Eurozone: the Swiss economy is in better shape and disinflation is not a concern. 11.51am GMT Analysts at Goldman Sachs reckon that the Swiss central bank could be forced to intervene in the foreign exchange markets again, once the impact of negative rates wears off:Goldman saying that the SNB may still rely on FX interventions to protect the floor after shock rate cut earlier. EURCHF currently at 1.2041 11.40am GMT Credit rating agency Fitch has warned that risks to Russia’s economy have intensified.In a statement, Fitch sounded the alarm over the rouble’s extreme volatility this week, and the interest rate hike to 17%.The inflationary impact of recent falls (inflation is heading towards double digits) will erode real incomes, further damaging private consumption and domestic demand.If rates have to be kept high or increased to support the currency at a lower oil price, the impact could be greater still. The CBR has estimated that average oil prices of $60/barrel could cause GDP to shrink 4.5%-4.7% in 2015.Fitch says $66 oil in 2015 would cut #Russia's GDP by 2.8%, and the CRB rate increase will make that worse. To review rating in January. 11.19am GMT After a rocky start, Greek bonds are actually rising in value now, pushing down the interest rate (or yield) on the debt. Greek Bonds actually doing okay this morning - the yield drops to 8.52 (-24bp) on the 10 year. 10.52am GMT The feel-good factor from last night’s Federal Reserve meeting continues to push European stock markets higher.Shares are rising on relief that the US central bank will be patient when deciding when to raise US interest rates.Equities in Europe are trying hard to take advantage of a dovish, US Federal Reserve-led rally in the States last night. The S&P 500 had its best day of the year, rising a shade over 2% to close back above the 2000 level. While the ‘considerable time’ statement remains in the minutes despite some reports to the contrary, the fact it changed its language slightly, and highlighted a ‘patient’ stance on when rates will start going up, maintained the dovish theme. The comments by chair, Janet Yellen, that this alteration in language did not actually mean a change in its outlook helped put a rocket under equities for the final part of last night’s session. 10.40am GMT Greece’s jobless rate has dipped a little, but remains in at depression-era levels.Elstat reports that the unemployment rate was 25.5% in the third quarter of 2014, down from 26.6% in April-June, and 27.2% a year earlier. 10.18am GMT Swiss central bank chief Thomas Jordan also confirmed that the Russian crisis had prompted today’s decision to charge commercial banks who deposit their francs with the SNB. 10.14am GMT Back to Switzerland....and the head of the Swiss National Bank has predicted that the negative interest rates announced today will remain “for the foreseeable future”.SNB chairman Thomas Jordan told a press conference that further measures could be imposed if it’s necessary to weaken the franc and stimulate inflation again.“If it becomes necessary, we can take further measures. Possible measures include a further reduction of interest rates or a reduction of the exemption threshold”.SNB'S Jordan says he doesn't expect negative rates for Retails customers in Switzerland, makes no sense #EURCHF #FX 9.51am GMT Record growth in department stores and electrical appliance stores in November 2014. Boosted by 'black Friday'It seems #BlackFriday gave UK retail sales a massive boost. That's it then. We'll never be rid of it. 9.49am GMT Britain appears to have caught the Black Friday bug.New figures from the Office for National Statistics show that retail sales jumped by 1.5% month-on-month in November, the biggest rise this year.“Black Friday’s shopping frenzy provided the sector with a timely boost and retailers will hope that this momentum is maintained throughout the festive period. “A combination of aggressive discounting and consumer’s determination to secure big ticket bargains ensured that electrical goods and household appliances were the standout categories. Clothing and footwear retailers used the event to reduce stockpiles of winter clothing, albeit to the detriment of their profit margins. 9.30am GMT Financial analyst are digesting Switzerland’s decision to impose negative interest rates on cash deposits at its central bank.The SNB continued to show its unwavering support for the EURCHF floor by introducing negative interest rates....We doubt the action will have long term effect and expect to see EURCHF grind back towards the EURCHF 1.2000 minimum exchange rate.”“Having seen the franc trading at, or very close to, the cap that it set of 1.20 to the euro over the past month, the SNB obviously felt it needed to shore up its defences against a building storm surge of money looking for a safe home. It is also faced with the potential for Q.E. by the ECB next year, which would likely put further downwards pressure on the euro across the board. “The timing is suspicious because the fee will be charged starting on January 22nd.” 9.08am GMT German firms appear to be shrugging off the Russian crisis, and Europe’s economic problems.The IFO survey of German morale, just released, has risen to 105.5 up from 104.7 last month. That’s the highest reading since August. 9.05am GMT Heads-up; Vladimir Putin’s press conference is about to start in Moscow. We’re running a separate liveblog, as it’s going to last for several hours:The @guardian is liveblogging Putin press conference. I'm in the hall and my colleague @Haroon_Siddique is in London. http://t.co/3GwlrJF6eHAnnouncement on the tannoy at Putin press conference asks journalists not to bring toys and furry animals into the hall. 8.56am GMT Over in Berlin, German chancellor Angela Merkel has warned that sanctions against Russia over Ukraine remain unavoidable as long as Moscow does not respect Ukrainian sovereignty.“As long as we do not reach this goal ... sanctions remain unavoidable, though I would like to reiterate that they were not and are not an end in themselves.” 8.48am GMT The Russian rouble is volatile around this morning, as traders await Vladimir Putin’s annual press conference, from 9am.It’s currently down 2.2% against the US dollar at 61.5 roubles/$1, having hit a low of 58/$1 in early trading.Not just @bmw , @GM now also reacting to #Russia. GM Halts car sales due to rouble volatility @business 8.32am GMT Greek three-year bonds weakened this morning after MPs rejected the government’s presidential candidate last night, pushing up the yield on the debt.Greek 3yr yields jump by 17bps as #Greece's PM Samaras still 20 MP's short for 3rd round of Presidential election. pic.twitter.com/getazQQCKs 8.27am GMT European stock markets have risen in early trading, taking their lead from Wall Street’s rally last night.The German DAX and French CAC both surged 1.7%, while the FTSE 100 is up a more modest 0.5% or 30 points at 6366.Markets had been expecting such a move and, despite signs of some disagreement on the committee as three members dissented, the shift is a signal of confidence in the sustainability of the US recovery. Fed Chair Yellen reassured that policy continued to depend upon the data, with no move likely within the next “couple of meetings”. 8.20am GMT Why has the Swiss central bank announced negative interest rates today?Because it wants to weaken its currency, the Swiss franc, by penalising banks who hold deposits.Timing of #SNB is pretty interesting ... just a week after the SNB's last policy meeting - #rouble trouble perhaps? 7.55am GMT The Swiss franc has weakened sharply after Switzerland’s central bank surprised the markets by announcing it would impose negative deposit rates of 0.25% on commercial bank deposits.The franc fell by half a cent, to 1.2095 francs against the euro, a two month low. The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination. It remains the key instrument to avoid an undesirable tightening of monetary conditions resulting from a Swiss franc appreciation. Over the past few days, a number of factors have prompted increased demand for safe investments. The introduction of negative interest rates makes it less attractive to hold Swiss franc investments, and thereby supports the minimum exchange rate. 7.41am GMT Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.And #SNB introduces negative interest rates as the great monetary policy experiment continues ... Continue reading...
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