New tensions in Greece over bailout deal
And on a final note, tough negotiations between debt-stricken Greece and its creditors over further cost-cutting measures has once again – alas - got off to a rocky start as the role of the International Monetary Fund comes under scrutiny.
Our correspondent Helena Smith reports from Athens
Before they had even begun, tensions between Greece and the Washington-based IMF had overshadowed the arrival of the first technical teams in Athens today.
This latest round of talks – the prelude, the government hopes, to completion of a review that will open the way to the much-anticipated debate on debt relief – hinges to great degree on the government forging ahead with its commitment to reform the country’s pension system. Proposals put forward by the leftist led administration have been quick to elicit howls of protest with demonstrators taking to the streets.
The IMF, which has yet to decide whether it wants to be even part of a third bailout programme for Greece (a topic expected to dominate talks when prime minister Alexis Tsipras meets the IMF chief Christine Lagarde on the margins of the Davos gathering later this week) has been especially tough amid mounting speculation – and leaks – that the proposals, a particularly sensitive issue given the hardship of austerity and recession, are wholly inadequate.
In an unusual fit of pique, the usually mild-mannered finance minister Euclid Tsakalotos appeared to draw a line in the sand this afternoon. The IMF had to make clear whether it stood by the leaks or not, he said.
“I want the IMF to clarify whether these are really its own leaks or the imagination of journalists,” he said of the reports that the body had roundly rejected the government’s plan. “I have been given no such notification … if [the reports are right] I expect it in writing,” he told reporters adding that both sides had agreed that the negotiations would not be conducted through leaks.
Racheting up the pressure the Oxford-educated economist insisted that while Athens was open to discussion it also had its own red lines.
“It is very important that pensions are not reduced for a 12th or 13th time for social and economic reasons.”
The red-hot issue is like to dominate what may well be a wrenching time ahead. Lenders behind the biggest bailout in global financial history signaled today through the European Commission that mission chiefs would not be returning to Greece before they received clarification on the proposals.
It could only be a matter of time before the euro zone crisis erupts again. <end>
And on that note, we’re wrapping up. Back tomorrow for a busy day.
Updated
European markets close in the red
After a jittery day, Europe’s main stock markets all closed lower tonight.
That extends 2016’s losses, but it’s a whimper rather than a rout as London’s FTSE 100 hits a new three-year low.
Here’s the final prices:
- FTSE 100: down 24 points at 5,780, -0.42%
- German DAX: down 23 points at 9,522, -0.24%
- French CAC: down 20 points at 4,190, - 0.5%
With no US action to excite them, traders rather ran out of juice by the close of another day dominated by the sliding oil price.
Jasper Lawler of CMC Markets explains:
The absence of the usual bump in afternoon volumes from US investors left European stock markets a little sleepy on Monday as Americans celebrated Martin Luther King Jr Day.
As has become the custom recently; it was the volatile price of oil that set the tone for equity trading. A bounce off the lows set in Asian trading for crude oil helped an encouraging start for European equities but as oil prices slid back, equities fell into the red.
Updated
It’s not all gloom today. Over in Ireland, there are signs that its economy continues to recover from its debt crisis.
From Dublin, Henry McDonald reports:
A sure sign that at least the Irish economic recovery is powering ahead - record numbers of passengers passed through Dublin Airport in 2015.
Dubin Airport Authority reveals today that 25 million passengers went through its doors over the last 12 months.
That is far higher than its previous peak in 2008 at a time when the Celtic Tiger was still roaring and just before the financial crash.
Transatlantic traffic at Dublin Airport is up 47% since 2008 while in the same period traffic to continental Europe has risen by 6.7%
To cope with growing passenger numbers, Dublin Airport Authority is midway through hiring about 350 new staff in areas such as security, customer service and asset management.
The growth in passenger numbers is expected to continue into 2016, as 11 new scheduled services have already been announced for this year, including new direct transatlantic services to Hartford Connecticut, Los Angeles, Newark and Vancouver. There are also new long-haul charter services to Cancun in Mexico and Montego Bay in Jamaica.
Dublin Airport supports or facilitates a total of 97,400 jobs in the Irish economy and contributed €6.9 billion to the national economy, according to a major study by economic consultants InterVISTAS has found
Summary: Volatility reigns
Time for a quick recap:
European markets have lurched between gains and losses today as the turmoil in the financial markets enters its third week.
The main indices are all in the red after six hours trading, with investors nervous ahead of tomorrow’s Chinese growth figures.
And with Wall Street closed for Martin Luther King Day, it could be a cagey afternoon too.
Markets Now » European indexes slightly lower https://t.co/qoyBv0jGin pic.twitter.com/xdpcym3eLm
— CNBC Now (@CNBCnow) January 18, 2016
The oil price has staged a small rebound, now hovering around the $29 per barrel mark. But it earlier fell to $27.67, on fears that Iran will add to the world’s glut of crude.
Ladbrokes, the betting firm, reckons it’s odds-on to keep falling this year, now that sanctions have been lifted on Tehran.
- Fall below $25 in 2016: 10/11
- Fall below $20 in 2016: 3/1
- Fall below $10 in 2016: 10/1
China is still centre-stage, after its central bank took new steps to ward off speculators driving down the yuan.
Nobel prize-winning economist Joseph Stiglitz has suggested that China isn’t as much of a basket case as some fear. But tomorrow’s GDP figures could show if he’s right.
I’m off to pack for Davos, but I’ll be back later with the close of the European markets...
Nigeria’s stock market is enduring a bad day.
The main index has slumped 4% to its lowest level since mid 2012, hit by the falling oil price.
That’s 20% off its recent peak - and barely half its value in mid 2014.
Nigeria stocks enter bear market
— MineForNothing (@minefornothing) January 18, 2016
In a double dose of bad news for the UK economy, Asda is cutting 200 jobs at its headquarters in Leeds.
It follows a tough Christmas for the Walmart-owned supermarket chain.
A thousand jobs are being cut across Tata Steel’s British operating, including 750 at its Port Talbot plant in Wales.
The Indian conglomerate blamed the surge of cheap imported steel into Europe, which exacerbated cheaper steel prices.
And the CBI has echoed those concerns: Emma Watkins, CBI Wales Director, says:
“These job losses are a real setback to the Welsh economy and it’s clear that firms in our steel industry face major global challenges to stay competitive.
“Chinese steel imports look to be having a big impact and it’s important that the European Commission urgently reports back on whether the market has been distorted unfairly by excess market supply.
The FT sums it up:
European equities are all over the shop today https://t.co/1GkG528CX7 pic.twitter.com/3WSFWJjGEL
— fastFT (@fastFT) January 18, 2016
Here’s a sobering fact: the total value of the world’s listed companies has dropped to its lowest level since the autumn of 2013:
Not even pessimists thought things would go so wrong so fast in 2016. Global mkt cap has plunged to lowest since '13 pic.twitter.com/IuiyT2PKxH
— Holger Zschaepitz (@Schuldensuehner) January 18, 2016
That suggests investors are expecting weaker global growth and smaller dividend payments in the coming years.
Volatile morning this.
European markets have now crept into positive territory again, with the FTSE 100 up a ‘mighty’ 13 points.
And that’s partly because oil has crept back over $29 per barrel mark in the last few minutes.
Everyone excited by oil back above $29 #crisisover
— Mike van Dulken (@Accendo_Mike) January 18, 2016
Over in Paris, president Francois Hollande has announced a new €2bn job creation scheme to tackle France’s unemployment crisis.
The plan will set aside €1bn for job training, and also provide €2,000 subsidies to a company when they take on a low-paid worker.
Hollande told business leaders that the plan wouldn’t require more taxation:
“These two billion euros will be financed without any new taxes of any kind, in other words, they will be financed by savings.”
Hollande’s presidency has been dogged by economic woes, with unemployment climbing steadily to record highs.
Today’s speech shows a ratcheting up of the rhetoric, as Associated Press explains:
French President Francois Hollande has declared what he called “a state of economic emergency” and says it’s time to redefine France’s economic and social model.
Hollande laid out a series of proposed economic measures Monday in an annual speech to business leaders to boost long-stagnant French growth and reduce chronic unemployment.
Today’s floundering rally means that that Stoxx 600 index of major European companies has shed 15% of its value since the start of December.
Does this validate the famous “Sell Everything” call issued by Royal Bank of Scotland analysts this month?
Not according to Tom Stevenson, investment director for personal investing at Fidelity International. He reckons investors should hold their nerve:
“We should remember that volatility is the price you pay for the long-term outperformance of equities over other asset classes.
“It is also worth remembering that staying fully invested through market cycles makes sense because missing even a handful of the best days in the market can seriously compromise your long-term returns. The best days in the market invariably follow close behind the worst ones – time in the market matters more than timing the market.”
We’ll know in a few months who is right...
Reuters is reporting that China’s top stock market regulator has offered to quit, after seeing hundreds of billions of dollars wiped off shares in recent months.
It’s not clear if Xiao Gang’s resignation has been accepted; but he may pay the price for the turbulence at the start of this year.
Over to Reuters....
Xiao Gang, 57, chairman of the China Securities RegulatoryCommission (CSRC), tendered his resignation last week after his brainchild, a “circuit breaker” mechanism to limit stock market losses, was blamed for exacerbating a sharp selloff and was deactivated on January 7, just three days after its introduction, a source with ties to the leadership and a financial industry source told Reuters.
The circuit breaker imposed a ‘time out’ if the market fell by 5%, and halted trading if it then dropped by another 2%.
Regular readers will remember how the circuit breaker forced trading to be suspended on its first day, on 4th January, and again on the 7th.
#China chief stock regulator Gang has offered to resign as bad regulation has enhanced chaos https://t.co/Y7VOKQ15SQ pic.twitter.com/G6px2yeRby
— Holger Zschaepitz (@Schuldensuehner) January 18, 2016
Those City analysts were right to be cautious..... Europe’s main stock markets are all in the red.
The brief rally has unwound itself, and here’s the situation:
- FTSE 100: -13 points at 5794 (-0.2%)
- German DAX: -40 points at 9,484 (-0.6%)
- French CAC: -35 points at 4,174 (-0.8%)
Hardly a major selloff, but it’s disappointing that the early flickers of optimism were blotted out so quickly.
IG’s Chris Beauchamp says:
In mid-morning trading, the FTSE 100’s early gains have evaporated as quickly as yesterday’s snowfall.
Indian stock market hits lowest level since May 2014
The ructions in the global markets have just driven India’s main index down to a 20-month low:
CNBC-TV18 Market Alert: Sensex Slips To Lowest Level Since May 21, 2014: Sensex 24180.13 -1.12%
— CNBC-TV18 (@CNBCTV18Live) January 18, 2016
Stocks are being pulled down by today’s falling oil price; energy exploration firm Cairn Energy has tumbled by 7%.
Nobel prize winning economist Joseph Stiglitz reckons that fears over China are overblown.
Speaking in Davos, Stiglitz told Bloomberg that:
“There’s always been a gap between what’s happening in the real economy and financial markets.”
“What’s happening in China is a slowdown by all accounts....but it’s not a cataclysmic slowdown.”
More here: Davos Veterans Say Stop Worrying About China’s Market Meltdown
Updated
Over in Davos, the World Economic Forum is making the final preparations ahead of its Annual Meeting, which begins on Tuesday night.
One of the main items on the agenda is the Fourth Industrial Revolution - the rise of more intelligent machines and new technologies such as self-driving cars, 3D printing and the blockchain that underpins Bitcoin.
And a new report from WEF has just warned that seven million jobs could lost in advanced economies over the next five years, particularly in heathcare, energy and financial services.
My colleague Jill Treanor has checked out the report. Here’s her story:
Europe’s early rally is already petering out, with the FTSE 100 now up only 4 points at 5808.
Equities now flat on the day...positive sentiment lasted a whole hr and 15 mins!
— RANsquawk (@RANsquawk) January 18, 2016
I guess there’s not much to inspire investors this morning.
And many may be keeping to the sidelines today, as the latest Chinese GDP growth figures are released overnight.
China’s central bank took fresh measures over the weekend to protect its currency against speculators.
The People’s Bank of China announced that foreign banks who engage in offshore yuan trading must place some of their yuan reserves with the central bank.
The move may deter the banks from aggressively driving down the yuan. Or as PBoC put it, imposing the reserve requirement would “inhibit pro-cyclical behaviour”.
In the short term, the move appeared to work, as the yuan strengthened a little against the US dollar.
But Kit Juckes, currency strategist at Société Générale, fears that it shows Beijing is making up policy on the hoof.
The danger is that this just leaves markets to focus attention elsewhere.
#China stocks closed higher after PBoC calmed nerves w/ higher Yuan fixing. ChiNext gained most, Up 2.9% at 2174.93. pic.twitter.com/sZ5YEN1GpT
— Holger Zschaepitz (@Schuldensuehner) January 18, 2016
Updated
City analysts are cautioning that today’s rally in Europe may be a temporary respite.
Mike van Dulken of Accendo Markets says that “concerns are still growing over global economic strength in the face of a collapsing commodities space”.
A positive start to the week for European equities? Well that makes a change
— Mike van Dulken (@Accendo_Mike) January 18, 2016
And Tony Cross of Trustnet Direct reckons a “temporary halt” has been called in the equity rout, particularly as the US market will be closed today.
Oil remains front of mind for many and the prospect of Iranian supplies coming back onto the global market certainly rattled investors in the Middle East yesterday, but elsewhere the reaction has been rather more muted. We’ve seen a calm session in Asia, although with crude prices now retreating once again, it would seem ambitious to think that we can read too much into the current air of calm.
With many markets on Wall Street closed for Martin Luther King Day, this may also help calm nerves - the week may not open with quite the catastrophic start some had eyed.
European markets rebound
European stock markets are actually rising this morning, which might reassure nerves.
The FTSE 100 index has gained 35 points, of 0.6%, to 5839. That claws back some of Friday’s rout, where the blue-chip index lost around 110 points.
Shares are also picking up in France and Germany, where losses in 2016 have been even steeper than in London.
It’s a fairly muted bounceback -- markets are only up around 1%. But after two weeks of mayhem, any recovery will be welcome in the City (assuming it lasts).
Investors will be watching the oil market closely this week, says Michael Hewson of CMC Markets:
The continued weakness in commodity prices, particularly in the oil and gas sector continues to spook world markets and now that Iran has been given the green light to come in from the cold, it is likely to be difficult to see where the next rebound in oil prices is likely to come from, raising concerns about further bankruptcy losses across the sector, if as predicted prices fall further towards $20 a barrel.
Oil fell below $28 a barrel earlier - it's now just above that https://t.co/eQHi9SRATU pic.twitter.com/eyFLBfaAqx
— Bloomberg Business (@business) January 18, 2016
It’s been a grim few months for commodities, with oil at a 12-year low and many metals hitting their lowest levels since the financial crisis.
And Bloomberg’s Caroline Hyde flags up that City speculators are betting that the slump will continue:
Bets against #Commodities continue... pic.twitter.com/AeztpHxJa4
— Caroline Hyde (@CarolineHydeTV) January 18, 2016
Oil hits $27.76 per barrel
Oil traders have marked Iran’s return to the markets by sending the cost of crude oil down to its lowest level in over 12 years.
The West’s decision to lift sanctions on Tehran helped to push Brent crude down to $27.67 per barrel today. Traders are anticipating a new surge of supplies hitting the market, intensifying worries about supply gluts.
We’ve known for a while that sanctions were likely to be removed, so it shouldn’t have shocked many traders.
Updated
Hong Kong stocks hit three-year low
Japan wasn’t the only Asia-Pacific market to suffer the Monday blues.
Hong Kong’s Hang Seng index fell by 1.1%, hitting a three-year low, as fears over China’s economy hit confidence again.
Australia’s market also weakened, reflecting concerns that demand for its commodities will be weak in 2016. It’s S&P/ASX 20 index lost another 0.7% - putting it close to a bear market too.
China’s market, though, defied the general gloom to finish 0.4% higher.
Japan flirts with bear market
Japan’s stock market is on the brink of a new bear market, after being hit by the global market turmoil.
After another day of heavy selling, the Nikkei index lost another 191 points, or 1.1%, today to close at 16,955.
That’s a four-month low, and around 19% off its recent high set last August. Once it loses 20%, it will be officially in ‘bear market’ territory.
Nikkei ends down 1.1% at 16955.57, closes below 17,000 for 1st time since Sept. pic.twitter.com/TnguP54uJS
— Holger Zschaepitz (@Schuldensuehner) January 18, 2016
Japanese exporters have been hit by the strength of the yen, which has rallied this year as nervous investors sought protection from riskier assets.
Updated
Introduction: Another week of drama looms
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
After the worst start to a New Year ever, world markets are facing another week of turbulence.
Friday night’s Wall Street rumble, which wiped another 390 points off the Dow Jones industrial average, has sent nerves on edge across the globe.
Fears continue to build over China, with its slowing economy threatening to puncture the huge credit bubble that has build up in recent years.
And oil could continue its crazy ride downwards. Iran is preparing to start pumping more crude supplies into a well-stocked market, after sanctions were lifted last night.
Middle Eastern markets have already been rattled, with Saudi Arabia’s index shedding over 5% yesterday to a near five-year low.
Kuwait lost more than 3%, while Qatar tumbled by 7%.
The European and US stock markets have already shed 8% this year, a shocking loss of wealth in just two weeks.
It may not be the great market crash that more pessimistic analysts have been calling for years.
But the scale of the losses this year suggest that investors have turned much more negative about the prospects for the global economy as a whole.
Gareth Isaac, fund manager at Schroders, says China is a serious worry:
Regarding China, we don’t see the cataclysmic 2008-style ‘credit crunch’ forming that some market participants do, but that doesn’t mean that we are not concerned.
There are significant risks. China now accounts for approximately 17% of global GDP; up from 10% in 2005. Any material slowdown in the second largest economy in the world would have significant ramifications for the rest of the globe. China is attempting to make the transition from a manufacturing-led economy to a service-led economy – a transition that took the UK generations – in a decade or so. That process is not going to be without difficulty, and the Chinese authorities are learning as they go. Mistakes will happen.
And that’s why traders are going to be cautious today, this week, and through much of 2016.....
Updated
