Eur/usd - page 51
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Eurozone youth unemployment reaches record high of 24.4%
The crisis facing the younger generation across the Eurozone worsened last month as youth unemployment hit a new record high of 24.4% with under-25s in Spain, Italy and Portugal finding it harder to get jobs.
The grim news on on employment came as the Netherlands was stripped of its prized AAA credit rating despite the country's recent exit from a year-long recession.
Ratings agency Standard & Poor's said on Friday that weakening growth prospects showed the country would struggle to improve its financial stability and generate new jobs.
It said: "The downgrade reflects our opinion that the Netherlands' growth prospects are now weaker than we had previously anticipated, and the real GDP per capita trend growth rate is persistently lower than that of peers."
It cited weakening consumer demand, high levels of personal debt and falling house prices for keeping consumer spending and tax receipts low in the next few years. One in four Dutch homebuyers is in negative equity as a result of falling property values.
Jeroen Dijsselbloem, the Dutch finance minister, said S&P's downgrade to AA+ was disappointing when the economy had returned to growth.
S&P's action leaves only three members of the eurozone with a top rating from all three agencies – Germany, Luxembourg and Finland.
The Eurozone jobless data showed Spain's youth unemployment rate has now increased to 57.4%, only marginally below Greece's August high of 58% - which remains the highest rate of youth unemployment for any country in the eurozone's history. Italy's youth unemployment rate rose to 41.2%, from 40.5% the previous month. In Portugal, it rose to 36.5% from 36.2%.
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Greece, troika agreement to be delayed
A deal between Athens and its international creditors, necessary to unlock bailout loans, will be delayed, the Greek finance minister said on Friday.
Senior auditors from the so-called creditor troika -- the EU, IMF and European Central Bank -- had been expected to return in Athens on Monday to resume an evaluation of pledged Greek reforms.
But Finance Minister Yannis Stournaras told reporters on Friday: "We have still to reach an agreement... we aim to finish this by the end of the year."
Lower-level "technical teams" will resume talks in Athens on Monday and the mission chiefs will return after a Eurogroup meeting on December 9, Stournaras said.
An agreement with the troika is necessary to unblock a one-billion-euro ($1.4 billion) instalment of financial aid pending since June.
Athens is also keen to wrap the talks before it assumes the rotating EU presidency in January.
The so-called troika of EU, IMF and European Central Bank creditors and Athens disagree on the level of a forecasted financing gap for 2014 and the measures that need to be taken to cover it.
The troika launched its regular audit at the end of September and talks then resumed in early November before another break last week.
The troika predicts the 2014 financing gap will exceed 1.5 billion euros, while the Greek government estimates the sum to be slightly more than 500 million euros.
Discussions are reportedly stumbling on the issue of a new property tax, debtor property auctions, layoffs in the state sector and the slow pace of privatisation.
Stournaras said the negotiations were over "two, three structural issues, less so on fiscal issues."
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Moody upgrades Greece’s debt rating
Moody’s, the international rating agency, has upgraded Greece by two notches, reflecting good progress with fiscal consolidation despite continued recession and fragile political stability.
The upgrade from Caa3 to single C with a stable rating still leaves Greek sovereign bonds deep in junk territory, but supports the coalition government’s forecast of a primary budget surplus this year before debt repayments, rising to 1.5 per cent of output in 2014.
“Moody’s expects that the government will achieve (and possibly outperform) its target of a primary balance in 2013, and record a surplus in 2014 in accordance with the adjustment programme,” the agency said.
A senior finance ministry official said on Friday that on the basis of 10-month revenue figures, Greece could achieve a primary surplus of close to €1bn this year.
An improved medium-term outlook and lower interest payments following last year’s restructuring of privately held Greek debt also contributed to the upgrade, Moody’s said.
The economy is bottoming out but will shrink by another 0.5 per cent in 2014 before growing by 1.0 per cent in 2015, it said. The EU and the Greek government both forecast an earlier recovery with growth of around 0.5 per cent next year after six straight years of recession.
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EUR/USD Forecast December 2-6
EUR/USD advanced for a third week in a row. As we enter the last month of the year, can it reach new highs? The rate decision is the key event of the week. Here is an outlook for these events among others, and an updated technical analysis for EUR/USD.
Eurozone Flash CPI exceeded expectations rising 0.9%, following 0.7% gain in October. Although the growth rate increased, it remained well below the European Central Bank’s (ECB) inflation target of 2% for nine consecutive months. The lowest inflation in almost four years registered in October is quite likely the reason behind the sudden ECB rate cut seen in November. However, the 0.9% gain eases fears that the euro zone is headed for deflation. Will the ECB come up with further accommodative measures on its December 5 meeting?
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Netherlands loses S&P triple-A credit rating
Standard & Poor’s stripped the Netherlands of its triple-A credit rating Friday, saying that the country’s growth prospects have deteriorated and it is not performing as well as peers.
It downgraded the country to AA+, meaning the only remaining eurozone countries with AAA ratings from S&P are Germany, Finland and Luxembourg. The Netherlands’ finance minister, Jeroen Dijsselbloem, said the downgrade was unsurprising “but disappointing.”
The Dutch economy has been hit by falling home prices and rising unemployment, which is expected to hit 8 percent next year.
“The downgrade reflects our opinion that The Netherlands’ growth prospects are now weaker than we had previously anticipated, and the real GDP per capita trend growth rate is persistently lower than that of peers at similarly high levels of economic development,” S&P said in its announcement.
It said it expects Dutch GDP to fall by 1.2 percent in 2013 and grow by 0.5 percent in 2014.
Dijsselbloem, who is also president of the Eurogroup of finance ministers, has prescribed spending cuts and tax hikes to strengthen Dutch and other European government finances and pave the way for long-term growth. Some economists say such austerity measures are counterproductive during a downturn, but the idea is popular in German-led policy-making circles.
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EUR/USD Dec. 2 – Lower After Weak Spanish PMI
EUR/USD has edged lower on Monday, following the release of Eurozone PMIs. The pair is trading in the high-1.35 range in the European session. Spanish Manufacturing PMI dropped below the 50 line, while the Italian and Eurozone Manufacturing PMIs met expectations. In the US, today’s key event is the ISM Manufacturing PMI. As well, Federal Reserve Chairman will deliver remarks in Washington and the markets will be looking for some hints about QE tapering from the Federal Reserve.
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Greece Factory PMI At 51-month High
Greek manufacturing activity contracted at the slowest pace in 51 months in November, as factory output increased for the first time since September 2009, survey data released by Markit Economics showed Monday.
The headline Markit Greece Manufacturing Purchasing Managers' Index to 49.2 from 47.3 in October. A PMI score below 50 indicates contraction in the sector.
Production increase in November, albeit modestly, ending a run of contraction that started in late-2009. The increase was driven by the consumer goods sector.
New orders remained unchanged, after declining in previous two months. Overseas demand declined for the third successive month, but at a slower pace.
However, manufacturers continued to shed jobs, but the rate of reduction was the least in nearly four years as consumer goods firms hired additional staff.
The pace of depletion in backlogs slowed to the weakest in the current 65-month sequence of decline. Meanwhile inventories decreased solidly.
Input prices rose modestly led by higher prices of steel and dairy products. Intense competition forced output prices lower.
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Eurozone PPI Data Due
Producer prices from euro area and construction PMI from the U.K. are due on Tuesday, headlining a light day for the European economic news.
At 3.00 am ET, Hungary's final trade data is due. In the meantime, Turkey's consumer and producer prices are due. Consumer price inflation is seen rising marginally to 7.8 percent in November from 7.71 percent in October.
At 4.00 am ET, Statistics Norway is scheduled to release retail sales figures. Economists forecast sales to rise 0.2 percent month-on-month in October, following September's 0.7 percent increase.
Half an hour later, U.K. construction PMI is due. The index is expected to fall to 59 in November from 59.4 in October.
At 5.00 am ET, Eurostat is set to issue Eurozone producer prices for October. Producer prices are forecast to drop 0.2 percent month-on-month after rising 0.1 percent in September.
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Euro zone PPI falls 0.5% in October
Producer price inflation in the euro zone fell more-than-expected in October, official data showed on Tuesday.
In a report, Eurostat said that its producer price index eased down by a seasonally adjusted 0.5% in October, compared to expectations for a 0.2% decline.
Producer prices inched up 0.2% in September.
Year-over-year, the producer price index declined at an annualized rate of 1.4% in October, compared to expectations for a 1% drop, after falling at a rate of 0.9% in September.
Following the release of the data, the euro held on to gains against the U.S. dollar, with EUR/USD rising 0.21% to trade at 1.3570.
Meanwhile, European stock markets remained lower. The EURO STOXX 50 retreated 0.8%, France's CAC 40 tumbled 1.2%, Germany's DAX fell 0.65%, while London’s FTSE 100 shed 0.5%.
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ECB To Enhance Dovish Tone; Keep Rates On Hold
The following is a collection of recent comments from European Central Bank Executive Board members and selected views from economists on key interest rates and liquidity operations ahead of Thursday's Governing Council meeting in Frankfurt.
INTEREST RATES:
Vitor Constancio: On Negative Deposit Rates, "We have announced many months ago that from a purely technical point of view ... we are ready to do it. But [there has been] certainly no decision about that." "Only, I think, in extreme situations that measure could be really considered." (Nov 28)
Yves Mersch: "It is now up to the banks making use of the favourable financing condition that we provide, passing this on to households and firms to ultimately revive the flow of credit in the euro area...The ball is in the court of the private sector and the euro area governments." (Nov 27)
Benoit Coeure: "We have been clear that it [a negative deposit rate] has been both discussed technically and investigated legally, so the ECB is ready" ... "it's only one instrument in the tool box; we have a range of instruments that we would be ready to use if we see further risks to price stability materializing but, as I said, the main scenario is one where inflation would gradually accelerate." (Nov 26)
Joerg Asmussen: "A negative deposit rate is a theoretically possible instrument. We discussed it at the [last] ECB Council meeting...But I have always said I would be very, very careful with that instrument." (Nov 23)
Mario Draghi: "If we do see low interest rates creating localised risks, then local tools should be used to address them. In particular, national authorities should make full use of macro-prudential tools that they have available." (Nov 22)
Commerzbank: A narrowing of the ECB's interest rate corridor only leads to a stabilisation of money market rates, but not to noticeably lower money market rates ... Seen from this perspective, a tighter interest rate corridor does not seem to be a very effective measure to avoid disinflation risks ... Nonetheless, it cannot be ruled out that the ECB Council will decide to narrow the corridor, as opposition within the Council to a negative deposit rate is too strong. Having said that, a tighter corridor could be effective if interest rate volatility in the money market should threaten to increase or even if money market term rates rise due to expectations of interest rate increases.
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