Greece pays public sector wagesUS industrial production in surprise fallBoE’s top regulator: UK banks must follow EU pay rulesUK construction output jumps in MarchGreece in advanced talks to sell 51% port stake to ChinaIMF’s Thomsen: Greek progress is slowEurozone bonds rise 5.48pm BST More weak US data - including industrial production and consumer sentiment figures - sent the dollar lower on the basis that any rate rise is pushed further into the distance, and as a consequence, lifted the euro. So European markets, particularly export-heavy Germany - lost early gains and ended the week on a downbeat note. The final scores showed: 5.36pm BST Here’s the rationale for the DBRS downgrade, which has come ahead of the next scheduled rating announcement for Greece from the agency on 12 June :The deviation of this review from the calendar is due to an increase in uncertainty over government policies and Greece’s capacity to remain current on its debt. DBRS placed the ratings Under Review on 4 February 2015 to reflect DBRS’s elevated concern over the potential for a deterioration in Greece’s creditworthiness as a result of actions by the Greek government following the general elections on 25 January 2015. In light of the change in government, and given the importance of financial assistance from the European Commission, European Central Bank and International Monetary Fund, DBRS’s concern over Greece’s ability to meet its financing needs had increased.The current downgrade is due to a further increase in uncertainty over whether Greece and its creditors will reach an agreement on a program that restores macroeconomic stability and improves Greece’s cash position. In the absence of an agreement, financing sources appear to be insufficient to meet Greece’s financing needs over the foreseeable future. This shortfall is due to the lack of access to bond markets, as well as a delay in an agreement between Greece and its official sector creditors over the conditions that the creditors require in exchange for continuing the existing financial assistance program, or entering a new longer term lending program. DBRS’s view is that a new longer term program is likely to be necessary to restore macroeconomic stabilization. The delay in an agreement has had an adverse impact on the economic recovery, on financial stability, and on the fiscal stance. 5.33pm BST Ratings agency DBRS has downgraded Greece to CCC, bringing it into line with Fitch.DBRS Downgrades Greece to CCC (high) Negative Trend - See more at: http://t.co/yPMA73Y9IkThis one matters more than you might think as @ecb still use DBRS ratings https://t.co/8Jkm81PmyM 5.18pm BST Here’s more about Greece’s efforts to scrape together cash:#Greece gov't asks its embassies and consulates to forward any cash reserves. http://t.co/kTFdfswAcA /via @tovimagr /ht @Hekimoglou#Greece Parliament speaker Konstantopoùlou (Syriza) refuses to transfer Hellenic Parliament cash reserves to the State. 4.41pm BST S&P: Italy affirmed at BBB-/A-3, outlook stable 3.36pm BST Greek prime minister Alexis Tsipras is hoping to bring up the deadlock with the country’s creditors at next week’s summit in Latvia, a meeting mainly designed to discuss eastern Europe, Greek newspaper Kathimerini has reported:Greek Prime Minister Alexis Tsipras plans to press fellow European Union leaders to help resolve the deadlock in talks with creditors, inserting his country’s crisis into an EU summit intended to discuss eastern Europe.Tsipras will raise the standoff in bailout negotiations on the sidelines of talks to be held May 21-22 in Riga, Latvia, according to a Greek government official. Another European official said Tsipras was expected to attend the summit, while saying that Greece is not on the meeting’s agenda. Both officials asked not to be named as the diplomacy is not public.European policy makers are giving few clues on the state of Greece’s crisis negotiations as investors try to figure out just how much money the country has left in its coffers after surviving another week. The 110-day-long standoff has triggered a liquidity squeeze, pulling the country back into a double-dip recession, amid renewed doubts over its place in the euro area.“Even if they have a deal before the bailout extension ends at the end of June, we don’t think they’ll get access to the full remaining €7.2bn of the current bailout extension,” Stephen Gallo, the European head of currency strategy at Bank of Montreal in London, said in an interview on Bloomberg Television. With the European Central unlikely to “rush in” and buy Greek bonds, the situation in Greece “is not over for a long time,” he said. 3.27pm BST Back to Greece, and the government has paid public sector wages due today, a total of around €500m, according to the finance ministry. Reuters reports:Athens, which had been expected to easily make Friday’s payments, will find it harder to meet wage and pension commitments later this month as well as debt payments in June.“The mid-May payments of wages and pensions ... were made within the scheduled time frame,” the ministry said. 3.23pm BST Wall Street is slightly lower after the day’s disappointing data. On the consumer confidence figures, James Knightley of ING Bank said the fall was a puzzle:The bad news just keeps on coming for the US right now with the University of Michigan consumer sentiment index having fallen sharply in May to 88.6 versus 95.9 in April. Given the consensus prediction was 95.9 this is a big miss and is a little perplexing. After all, employment is rising, real incomes are rising, equities are rising and the housing market is performing ok. It is possible that the weakness in first quarter GDP numbers and higher Treasury yields have caused some concern and that gasoline prices have moved a little higher, but things don’t seem bad enough to justify the steepest drop in confidence in over two years. The report again implies little prospect of imminent policy tightening, but we suspect that the story isn’t as bad as these numbers suggests. 3.07pm BST More weak US data.The University of Michigan consumer sentiment index has fallen from 95.9 in April to 88.6, much lower than the 96 figure analysts had been expecting and a seven month low. 3.04pm BST Reaction to April’s weaker-than-expected US industrial production numbers is coming in. Coupled with the weak US retail sales figures earlier this week, the feeling is that the second quarter didn’t get off to the best of starts following a shocking first quarter when GDP increased at an annual rate of just 0.2%.Industrial output has now fallen for five straight months, which is not the sort of environment in which the Federal Reserve raises interest rates. Certainly, the oil price effect has been in play and dented oil and gas output, but manufacturing has also been subdued. With retail sales also looking fairly soft, expectations of a decent bounce in Q2 GDP after Q1’s weakness are starting to evaporate.Industrial production in April was dragged down by a drop back in utilities output, as the earlier weather-related distortion was unwound, and a sharp decline in oil and gas drilling.Elsewhere, the modest rebound in the Empire State manufacturing index to +3.1 in May, from -1.2, indicates that the stronger dollar is still restraining factory sector activity. 2.42pm BST US markets have opened slightly higher, following the S&P 500’s record high on Thursday. 2.24pm BST US industrial production fell for a fifth month in April, down 0.3% (following a revised 0.3% fall in March). 2.16pm BST Reprieve or reversal? Bond markets rise, yields fall across the #Eurozone. 10yr Bund yields drop to 0.65%. pic.twitter.com/wuuZk5Kx4k 2.09pm BST The Guardian’s Helena Smith also reports that along with privatisations - a red line the government had said it would not cross - it is now also considering: 2.01pm BST Back in Greece, former deputy premier Evangelos Venizelos has accused the anti-austerity government of being a “prisoner to its pre-election pledges”.He said:The government can’t agree with its own members and parliamentarians and because of this, it can’t conduct a real and effective negotiation [with the debt-stricken country’s creditors].The cost that the country has been paying, for the last four months, is huge. And that is down to the fact that everyone in the government is a prisoner of its pre-election promises. This vicious circle has to end. 1.37pm BST NY #Fed Empire survey remains soft, rising to only 3.1 in May vs. -1.2 in April; 6-month outlook slips as well (29.8 vs. 37.1) 1.34pm BST Over in the US - where every piece of data is being examined for its impact on the Federal Reserve’s plan for possible interest rate rises - New York manufacturing activity accelerated in May after weakening for three consecutive months.The New York Fed’s Empire State business conditions index rose to 3.09 in May from -1.19 in April, but this was below analysts expectations of an improvement to 5. 12.42pm BST Eurozone bond yields have fallen (reflecting higher prices), following weeks of volatility and price swings.German 10-year yields dropped seven basis points to 0.64%, but were still above the record low of 0.05% hit last month. 12.20pm BST Over in Athens the rhetoric reached boiling point this morning. 12.08pm BST European markets are still up, with the FTSE back above 7,000.Investor confidence has been boosted by Mario Draghi’s pledge to press ahead with the ECB’s £1.1 trillion bond-buying programme (despite accelerating growth and the diminishing threat of deflation), and by the expectation that an imminent US rate rise is no longer on the table. 11.39am BST Holger Schmieding, economist at Berenberg, believes there is a 70% chance Greek will do just enough to stay in the euro.On current information, Greece looks likely to run out of money in late May or early June. Reality seems to be gradually dawning on prime minister Tsipras. Just back from a one-day visit to beautiful Thessaloniki, my somewhat superficial impression is that the overall mood in Greece is becoming much more realistic after an initial post-election honeymoon period for Syriza and its policy ideas.Despite serious risks, we continue to see a 70% probability that Tsipras will do sufficient u-turns in the end to keep Greece in the euro. With intense negotiations on various levels, we may – with luck – hear about some further progress early next week, possibly leading to a first deal by the end of May. While differences remain huge, negotiators seem to be finally tackling the really thorny issues of pension and labour reforms as well as the overall size of the needed fiscal correction. 11.20am BST Poul Thomsen, the man in charge of the Greek programme at the International Monetary Fund updated the IMF’s executive board on Thursday.According to reports, Thomsen said it was positive that the Greek prime minister Alexis Tsipras had become more closely involved in negotiations with the country’s creditors. IMF's Director Thomson says that the IMF has not seen any major developments in the Greek negotiations, according to MegaTV (@RANsquawk)IMF's Thomsen: We can't come up with #Greece's debt sustainability analysis and conclude the review if we don't hve access to data in Athens 10.47am BST One man embarked on a 1,550 mile road trip across Greece to highlight the remnants of Greece’s industrial past. 10.27am BST While the jump in construction output in March and the the upward revision for Q1 are positives, some of the details in the ONS report are not so pretty.New housing construction fell 3.4% in the first quarter, at a time when politicians/the industry is constantly talking about the desperate need for new homes.UK construction in Q1. Biggest quartely dip in public house building since Q1 2001. At least we built more factories. pic.twitter.com/6b9OVXJpaYParties pre-election told young people there'd be lots more houses. Better get on with it: housing construction was down 3.4% Jan-Mar 10.08am BST The big jump in construction output in March, combined with upward revisions for January and February, has brightened the picture for the first quarter overall.The ONS now estimates that the sector shrank by 1.1% in the first three months of the year, compared with the fourth quarter of 2014. Still in negative territory, but not as bad as the 1.6% decline the statistics agency had pencilled in at the time of the first estimate of first-quarter GDP last month. Construction output saw a much-needed and welcome rebound in March. However, this was not enough to prevent marked contraction of 1.1% quarter-on-quarter in the first quarter. At least though, the contraction in construction output in the first quarter at 1.1% quarter-on-quarter was less than the 1.6% estimated in the preliminary national accounts data. 9.41am BST Construction output jumped 3.9% in March according to the Office for National Statistics. That was better than the 2.5% increase forecast by economists. It took the annual rate of growth to 1.6% from -0.2% in February. 9.13am BST Andrew Bailey, the Bank of England’s deputy governor for prudential regulation, has been speaking in London about the state of UK banks. 8.34am BST Greece is in advanced talks with China’s Cosco over the privatisation of its largest port at Piraeus.In a sign that Greece is willing to make some compromises as it tries to seal a deal for emergency funding from its creditors, the country’s defence minister said the government was in detailed discussion with China about the port.We are in very advanced talks to expand this co-operation very soon in relation with the inclusion of a railway network as well. 8.03am BST Markets have indeed opened higher. 7.56am BST And this is the view of Mike van Dulken and Augustin Eden at Accendo Markets, in a morning note titled: Another Mario speech, another boost for markets. FTSE100 Index called to open +20 points at 6995, having recovered from yet another test below 6900 to revisit 7000. The index continues to hold above its 100-day moving average (6915) with Bulls remaining optimistic of a revisit of 7127 highs while the bears refuse to ignore falling highs from mid-April hoping for another drop back towards 6900, or lower. Watch levels: Bullish 7010, Bearish 6950.The positive opening call comes after the FTSE100 gained 3.4% in Thursday trading as US Fed member commentary appeared to take a June interest rate rise off the cards. 7.47am BST Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.European markets are expected to open mainly higher this morning after a record high finish for the S&P 500 last night. After almost seven years of a debilitating sequence of crises, firms and households are very hesitant to take on economic risk. For this reason quite some time is needed before we can declare success, and our monetary policy stimulus will stay in place as long as needed for its objective to be fully achieved on a truly sustained basis. Continue reading...
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