Greece gets €2bn aid tranche
Klaus Regling, who runs the eurozone’s bailout mechanism (the ESM) has confirmed that Greece has done enough to qualify for a new loan:
“Today’s decision to disburse €2 billion of ESM funds reflects the Greek government’s commitment to the programme as it implemented an extensive list of essential reforms. These include key financial sector reforms which are important to support the ongoing bank recapitalisation process.
If programme implementation remains strong, I am confident that the Greek people’s reform efforts will allow them to make visible strides towards a sound recovery”. <end>
This disbursement is several weeks late, though, following a row over implementing tougher rules on home repossessions (or foreclosures). That has worried some analysts, who fear that Athens may struggle to stick to the deal. Still, €2bn shouldn’t be sniffed at.
Updated
It’s official... Greece is getting its next aid tranche, worth €2bn.
#ESM Board of Directors has approved the disbursement of €2 billion to #Greece, #ESM press release will be released shortly
— ESM (@ESM_Press) November 23, 2015
Afternoon summary
Time for a recap.
Growth across French companies has weakened this month, after the Paris terror attacks. But firms remain optimistic about long-term prospects.
Growth across the wider eurozone private sector has hit its fastest rate since 2011. Peripheral countries are now growing faster than France or Germany.
But US factories have reported a slowdown. A fall in exports shows that America is being hurt by problems in emerging markets.
Drugs giant Pfizer is shifting its tax base to Ireland in a controversial ‘inversion’. The company is taking over rival Allergan in a $160bn deal.
EXCLUSIVE» Pfizer CEO: "This is a great deal for America...", great deal for Pfizer, enables synergies, tax benefit pic.twitter.com/AofcjCQvbH
— CNBC Now (@CNBCnow) November 23, 2015
Pfizer CEO Ian Read: "This is a great deal for America" looking to pull off largest inversion ever to Ireland to escape US corp taxes
— Sara Eisen (@SaraEisen) November 23, 2015
The copper price has hit a new 6.5 year low. Traders blamed concerns over China’s slowdown and the strong US dollar.
But oil has recovered from its early losses. A statement from the Saudi cabinet, pledging to work with other producers, has spurred talk that OPEC might cut production.
And eurozone finance ministers holding a Eurogroup meeting. On the agenda: 2016 budget plans, the Paris terror attacks and Greece’s bailout.
US manufacturing growth hits 25-month low
Ouch! Growth in America’s manufacturing sector has unexpectedly fallen to a two-year low this month.
Markit’s US flash PMI index has dropped to 52.6 in November, a chunky fall compared to October’s 54.1.
It’s the weakest reading since October 2013 (but still over the 50-point mark separating expansion from contraction).
Markit US flash manufacturing #PMI falls to its lowest for just over 2 years in November. Find out more here: https://t.co/vTISxa43fw
— Markit Economics (@MarkitEconomics) November 23, 2015
US firms reported that output and new orders has slowed this month, meaning they took on new staff at a slower rate.
Worryingly, export sales fell.
Chief economist Chris Willliamson says the report shows US factories lost momentum last month:
Domestic demand appears to be holding up well, but the sluggish global economy and strong dollar continue to act as dampeners on firms’ order book growth. Export orders showed a renewed decline, dropping for the first time in three months.
But the sector is still growing, meaning the Federal Reserve could still raise interest rates next month.
Updated
A few photos from inside today’s eurogroup meeting have arrived:
As regular readers know, eurogroup meetings this year have been dominated by the Greek crisis (and boy, there were a LOT of meetings).
But as Finand’s finance chief tweets, the agenda has changed:
Situation changes quickly. In July: all about the #euro. Now: all about the refugee crisis and terrorism. EU needed on all fronts.
— Alexander Stubb (@alexstubb) November 23, 2015
Greece, though, is hoping to get its €2bn aid payment signed off today - after agreeing various austerity measures last week.
Finmin @tsakalotos #Eurogroup:#BrusselsLockdown but #Greece to get approval for the 2bn by #ESM photo @ArisoikoPhoto pic.twitter.com/xlLrnv5NqN
— Efi Koutsokosta (@Efkouts) November 23, 2015
Ireland’s finance minister Michael Noonan has arrived at the eurogroup meeting.
He insists that Dublin didn’t encourage Pfizer to shift its tax base to Ireland through its huge merger with Allergan.
They are “obviously doing it for tax advantages…… but we are not pushing for inversion”, Noonan says. “It’s a decision by the two companies.”
Our priority is to ensure there are no job losses, and that jobs are created, he adds.
Not a word from Dijsselbloem on #Greece before the #Eurogroup (in English at least). Times they are a changing.
— Eric Maurice (@er1cmau) November 23, 2015
Jeroen Dijsselbloem has added that Brussels doesn’t have any immediate concerns about the cost of addressing the current security crisis in France.
The priority today is to show our solidarity with the French, and also Belgium after its weekend security clampdown.
It’s too early to say whether France’s decision to increase defence and security spending will interfere with its fiscal targets, Dijsselbloem tells reporters at today’s Eurogroup session.
Dijsselbloem points out that countries facing ‘exceptional conditions’ can get extra leeway. At the moment, France is ‘broadly compliant’ with the EU’s targets, he adds.
RTRS - EUROPGROUP'S DIJSSELBLOEM SAYS FRANCE, BELGIUM BUDGETS ARE BROADLY COMPLIANT WITH EU RULES
— Michael Gallardo (@mgallardom) November 23, 2015
(France is supposed to bring its deficit below 3% of GDP by 2017, but president Hollande and prime minister Valls have already hinted that this target will be missed, as Paris bolsters its security)
Updated
Eurogroup president Jeroen Dijsselbloem has also arrived at today’s meeting.
He confirms that Portugal has still not submitted a 2016 budget for inspection by eurocrats in Brussels:
We hope that they will send one in very soon....either this government, or the next.
Q: Portugal may soon have a new government, made up of socialists and communists. iIll that be a problem?
Dijsselbloem says:
I can’t speculate....but either way. Portugal must send in a budget as soon as possible. If that’s from a new government, that’s also fine.
Updated
Finance ministers are arriving in Brussels now for today’s eurogroup meeting. There’s a live feed here.
Finland’s Alex Stubb just spoke to reporters. He says he’s not concerned that Portugal hasn’t submitted a budget yet....we must wait for a “responsible government” to be formed.
[Portugal’s centre-right government lost a confidence vote this month, but the president appears reluctant to appoint a socialist replacement].
Stubb (a conservative) adds that it’s not his job to appoint the Portuguese government.
But he hints that he’d like his fellow right-wingers to retain power; citing the “absolutely fantastic” co-operation he’s enjoyed with Portugal’s finance minister, Maria Luís Albuquerque.
Q: Could this meeting be a chance to say goodbye?
I hope not, Stubb replies firmly.
The French stock market is under-performing the rest of Europe today, after this morning’s PMI report showed growth in France’s service sector is slowing.
The CAC index, which includes the 40 biggest listed companies in Paris, has lost 0.7%.
Italy’s market is higher, though, after Markit reported that the eurozone periphery was outperforming France and Germany this month (see earlier chart).
Mining stocks are still dragging the London market down, with the strong dollar weighing on the commodity market.
The oil price has just rebounded from this morning’s lows, thanks to a new statement from Saudi Arabia.
Brent futures rebound after Saudi Arabia says it's ready to cooperate for stable oil mkts, Saudi press agency says pic.twitter.com/9zh8vNI0oq
— Angelina Rascouët (@arascouet) November 23, 2015
The rally was triggered by a news report from the Saudi cabinet, which said the Kingdom remains keen to work with fellow oil producers and exporter to ensure the stability of the oil market.
Traders may be calculating that Saudi is prepared to cut production to push up the oil price - although the actual statement seems slightly vague:...
#Oil prices rally nearly $2 a barrel -- but is this statement from #SaudiArabia really anything new? #OPEC #KSA pic.twitter.com/pOxkFayaza
— Javier Blas (@JavierBlas2) November 23, 2015
The Pfizer-Allergan merger isn’t all about tax, apparently (perish the thought!!).....
Pfizer chief executive Ian Read says:
“The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world.”
Here’s Rob Davies’s story on the deal:
Updated
Pfizer and Allergan agree $160bn takeover
The biggest deal in pharmaceutical history has just been confirmed.
Viagra-maker Pfizer will merge with Allergan, the firm behind Botox, in a deal that values Allergan at around $150bn (or £100bn).
Shares of Allergan and Pfizer lower in premarket trading after announcing deal to combine for about $160B. $PFE $AGN pic.twitter.com/nIk9HdA6Ls
— CNBC Now (@CNBCnow) November 23, 2015
The combined company will keep its HQ in New York, but have its “principle executive offices” in Dublin.
That’s would allow Pfizer to shift its tax domicile from the US to Ireland, and benefit from the country’s lower corporation tax rates.
Such tax inversion deals are awfully unpopular in Washington, as politicians fume at the sight of US companies avoiding paying their fair share. As Ed Pilkington reported last night:
The pending fusion of the companies would be the largest so-called “inversion” yet, whereby corporations on paper relocate their headquarters to more favorable tax environments by appearing to be bought by much smaller entities. It comes at precisely the moment the US treasury is attempting to block such deals.
Treasury secretary Jack Lew said over the weekend: “US companies are currently taking advantage of an environment that allows them to move their tax residence overseas to avoid paying taxes in the US, without making significant changes in the nature of their overall operations.”
Updated
Today’s PMI report may not deter the European Central Bank from launching new stimulus measures in December.
Although activity is rising, companies also reported that the prices they pay for goods and services fell marginally this month. That suggests
Timo del Carpio, European economist at RBC Capital Markets, says this shows inflationary pressures are “stubbornly static”:
Activity looks to have accelerated in November, with the sectoral level breakdown also looking somewhat more balanced this time around. However, despite signs of overall activity remaining robust, inflationary pressures still appear stubbornly subdued at this stage of the recovery cycle. As such, the pressure on the ECB Governing Council to act looks to us to remain fully in place going into their final meeting of the year.
Back in the City, traders are piling into Home Retail Group, the company behind Argos and Homebase.
Shares in Home Retail Group have jumped over 6% today, making it the top riser on the FTSE 250 index.
This follows reports that private equity firms are taking an interest, after the company posted a profit warning last month that send shares sliding.
Argos owner Home Retail Group shoots to top of the FTSE 250 leader board after rumours it is a takeover target https://t.co/fQvrAXAFTP
— Joanna Bourke (@ES_JoBourke) November 23, 2015
Eurozone finance ministers will be pleased to hear that European businesses are growing at the fastest rate since 2011, as they gather for today’s Eurogroup meeting.
They’re still expected to meet in Brussels this afternoon, despite the security clampdown in the Belgian capital.
On the agenda: the draft 2016 budgets submitted by eurozone members. Austria, Lithuania, Italy and Spain have already been warned that their plans risk breaking EU rules.
However, the cost of dealing with the refugee crisis should force Brussels to offer more leeway.
On the agenda of today's #Eurogroup : draft budgetary plans for 2016 of #eurozone countries https://t.co/HqEWsf4Mrn
— FinPermRepEU (@FinPermRepEU) November 23, 2015
Ministers will also discuss Greece. On Saturday, eurogroup chief Jeroen Dijsselbloem declared that Athens has (finally) hit the first set of milestones under its new bailout, which should unlock aid payments.
Statement by the President of Eurogroup on Greece
Today’s report also showed that Europe’s factories are lagging behind service sector firms:
Euro zone PMIs: services powering recovery pic.twitter.com/oCO3uJBhok
— Eric Burroughs (@ericbeebo) November 23, 2015
That reflects the weakness in the global economy, which has left Europe more reliant on domestic demand.
The slowdown in France this month means the gap with other eurozone neighbours has widened:
Business expectations in the French service sector remain subdued. Markit reports:
While some firms cited the securing of major contracts and launch of new services as factors likely to support activity growth over the next 12 months, others pointed to a drop in confidence following the Paris attacks.
Updated
Euro-area #PMI survey continues to signal stable recovery momentum. No real deceleration or acceleration. Food for both #ECB hawks & doves.
— Maxime Sbaihi (@MxSba) November 23, 2015
Chris Williamson, chief economist at Markit, says today’s PMI report shows the eurozone economy is picking up pace:
“The PMI shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past four-and-a-half years. The data are signalling GDP growth of 0.4% in the closing quarter of the year, with 0.5% in sight if we get even just a modest uptick in December.
That would be an improvement on the third quarter of 2015, when GDP rose by just 0.3%
Williamson adds:
“The improved performance in terms of economic growth and job creation seen in November are all the more impressive given last weekend’s tragic events in Paris, which subdued economic activity in France – especially in the service sector.
Updated
Eurozone company growth hits four-year high
Growth across the eurozone private sector has hit its highest level since May 2011, despite France’s weakness.
Markit’s monthly healthcheck of the sector, the eurozone PMI, rose from 53.9 in October to 54.4 this month.
The strongest growth was seen in the eurozone periphery, rather than its biggest two economies.
Service sector growth outpaced factories, as Markit explains:
The recovery continued to be led by the service sector, where business activity and new business rose at the fastest rates since May 2011 and employment showed the biggest monthly gain for five years.
Manufacturing output growth meanwhile also gathered pace, reaching a three-month high amid the largest monthly improvement in order books since April of last year.
Economic activity in the euro area hit a 4 1/2-year high this month, according to a new report that also pointed to weak price pressures.
— Francine Lacqua (@flacqua) November 23, 2015
Economists are cheered by the acceleration in Germany’s private sector this month:
German economy defies growth worries (at least for now), with November PMI increasing to highest level since August.
— Carsten Brzeski (@carstenbrzeski) November 23, 2015
Markit on Germany: fastest rise in new business in 2 years; largest backlogs of work in 4.5 years; strongest employment since end-2011.
— Frederik Ducrozet (@fwred) November 23, 2015
German firms are ending the year on the front foot, with growth hitting a three-month high.
Markit’s Flash Germany Composite Output Index has come in at 54.9, up from 54.2 in October. That’s the strongest reading since August.
Germany’s service sector outpaced its factories, as this chart shows:
French service sector growth hit by Paris attacks
We have the first concrete sign that this month’s terror attacks in Paris have caused some economic damage.
Growth across France’s private sector has hit its lowest level in three months, according to Markit’s monthly healthcheck of the sector.
Its Flash France Composite Output Index, which measures activity at manufacturing and services firms, dropped to 51.3 from 52.6 in October. Any reading over 50 shows growth.
The slowdown suggests French restaurants, hotels, and retailers have seen a dip in trade after the atrocities which rocked the capital 10 days ago.
Encouragingly, French firms also reported a rise in new orders, suggesting the economy won’t be badly hit.
Jack Kennedy, senior economist at Markit, explains:
“French private sector output growth weakened slightly in November, with the Paris attacks reported to have hit activity among some service providers. However, the trend in new business firmed a little, with growth quickening to a five-month high, while backlogs of work rose again.
While the longer-term economic impact following the attacks remains uncertain, PMI data suggest that GDP is on course to post another modest expansion in Q4 following the 0.3% growth reported in the third quarter.
Updated
Mining stocks drag London market down
Shares in mining giants are being hit hard this morning, matching the rout in the metals market.
Commodity giants such as Glencore, Anglo American and BHP Billiton are leading the selloff:
That’s pulled the FTSE 100 down by 52 points, or almost 0.9%, to 6281 points.
Glencore’s shares are now 30% below their level in September, when it tapped shareholders for new funds.
Glencore $GLEN issued shares recently at 125p, now 86p. Ouch!
— John Mennis (@JfmJm) November 23, 2015
Iran’s oil minister has helped to weaken the oil price today, by declaring that his country will boost its own production levels once Western sanctions are eased.
Bijan Zanganeh told reporters that:
“To increase Iran’s oil production in the global market after the lifting of sanctions, we don’t need permission from OPEC or any other organisation.”
Zanganeh also predicted that OPEC will not change its output policy when it meets next month.
Oil falls back towards $40 per barrel
Oil is also on the slide this morning.
The price of a barrel of US crude has dropped almost 3% to below $40.70, a drop of $1.20.
WTI Crude #oil (Jan.) falls as much as 3% to 40.64
— Advisory Desk (@advdesk) November 23, 2015
Brent crude, sourced from the North Sea, is down 1.8% at $43.84
Traders are blaming supply glut worries, especially if oil cartel OPEC decides to leave production unchanged. It holds its next meeting on December 4th, and may decide to leave production levels unchanged.
Copper hit by commodity selloff
Copper has hit a new six-year low this morning as the rout in the commodities sector deepens.
The strengthening US dollar, and fears of weaker demand for China, are hitting metals and energy prices.
London copper, the benchmark measure, slumped to just $4,444 this morning, a fall of over 2.5%. That’s its lowest level since early 2009 - when the world economy was gripped by a post-Lehman Brothers recession.
#Copper Slumps Below $4,500 For First Time Since 2009 https://t.co/91oBj2OT9I @business #nickel #aluminium #China pic.twitter.com/EBKWpiLxl1
— Javier Blas (@JavierBlas2) November 23, 2015
Copper has declined 5% in less than 24 hours of trading. Likely takes out stops beneath $2 then reverses
— . (@TheEuchre) November 23, 2015
Other metals, such as Zinc and nickel, are also falling this morning.
Analysts are citing China as a key factor.
Overnight, the Peoples’ Bank of China (PBOC) fixed the yuan at its lowest level against the US dollar since August. That suggests it is worried that the economy is weakening.
The Agenda: US rate hike looms ahead of euro PMIs
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Coming up today....
The looming prospect of a US rate rise is moving the markets this morning. The dollar is strengthening, as investors anticipate a hike at next month’s meeting.
Alastair Winter, chief economist at City firm Daniel Stewart, reckons the first rate hike since 2006 is in the bag:
The minutes from the last meeting at the end of October together with a barrage of speeches from across the whole spectrum of hawks and doves have made it almost certain that the FOMC will hike in December.
He predicts a “dovish hike” - with one hike next month and an indefinite pause thereafter.
But while the US faces higher borrowing costs, Europe is likely to need more stimulus soon.
New surveys of how eurozone companies are performing this month are due today. Poor readings may strengthen the European Central Bank’s determination to act.
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8am GMT: French manufacturing and services PMI
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8.30am GMT: German manufacturing and services PMI
- 9am GMT: Eurozone manufacturing and services PMI
Also coming up...
Eurozone finance ministers are due to hold their latest eurogroup meeting today in Brussels.
They’ll be discussing the draft budgetary plans for 2016 of euro area member states, on the basis of the European Commission’s opinions.
Last week, the EC warned that Italy, Lithuania, Austria and Spain all risk breaking EU rules, so it could be a tense meeting.
And we’ll also be watching Volkswagen, following reports that the diesel emissions scandal is now hitting sales.
$VOW.GY called down 2.8% after report Co.'s business is dead and sales have declined significantly and is to reduce its capex plans for 2016
— RANsquawk (@RANsquawk) November 23, 2015
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