21.14 Fitch adds that America's AAA rating "will likely be lowered? unless there's a concrete a plan to reduce its deficit. ?Agreement will also have to be reached on raising the federal debt ceiling, which is expected to become binding in the first half of 2013,? it says.
21.04 More on Fitch's warning to America: essentially the ratings agency points out that the failure of the Congressional Joint Select Committee on Deficit Reduction to agree on $1.2 trillion of deficit reductions has put into question its ability to contain the rise in federal debt. Not taking action now will lead to more pain in the future, it says:
By postponing the difficult decisions on tax and spending until after the forthcoming Congressional and Presidential elections, the scale and pace of required deficit reduction will consequently be greater. Even under optimistic economic and fiscal policy assumptions, Fitch believes that at least USD3.5 trillion of additional deficit reduction measures will be required to stabilise federal debt (held by the public) at around 90% of GDP in the latter half of the current decade.
20.26 Standard & Poor's has already taken America's AAA rating away, and now Fitch is threatening to do the same:
The high and rising US federal and general government debt burden is not consistent with keeping the AAA rating.
But it also says that it won't happen before 2013. Quite why the move is ruled out for 2012 is not clear.
19.52 AFP is reporting that Standard & Poor's has downgraded Hungary's credit rating to junk.
19.13 Spain has named its new economy minister: 51-year-old Luis de Guindos, an ex-Lehman Brothers executive.
He has solid political credentials with the ruling Popular Party, which won an election landslide in November as voters punished the Socialists for their handling of the economic slump.
De Guindos was a member of then prime minister Jose Maria Aznar's team from 1996-2004, working in the economy ministry and rising to become state secretary for the economy from 2002-2004. After that, he was executive chairman for Spain and Portugal at Lehman Brothers from 2006-2008.
Speaking at an economics seminar in Madrid last month, he said:
It cannot be that when activity declines businesses automatically fire temporary workers. It cannot be that when a company's revenue declines 50pc its industrial sector agreement obliges it to raise salaries by inflation plus two points. Half of the financial sector needs a new round of restructuring.
18.56 The FTSE 100 closed down 0.55pc today, but these tables show the outcome for the five companies at the luckiest and unluckiest ends of the spectrum.
18.20 Italian and Spanish government 10-year bond yields rose today after doubts emerged as to whether banks would use much of the hefty three-year loans they took from the ECB to buy sovereign debt and ease the cost of borrowing.
You can see the rises in the graph below (the yields look completely flat, but if you click on each country name you can toggle its graph line on and off to get a closer look at those remaining).
17.25 With only two trading days until Christmas (and Friday is only a half-day...) there isn't much time left for the traditional "Santa rally". Giles Marriage, associate director at Thesis Asset Management, had this to say this morning:
'Santa rallies' have seen UK blue chip shares rise in December for the last eight years in a row. Looking back further, the FTSE 100 has only had three negative Decembers in the last 27 years and has returned on average +2.88pc.
Of course, the FTSE 100 lost 0.55pc today, so we now need a 300+ point rise to reach the value seen at the start of the year. We'd also need a Santa rally of more than 2pc to end the month in the black...
17.10 Fitch says that deterioration in the eurozone is leading to weaker economic growth, heightened financial vulnerabilities and some negative rating actions in Europe. Charles Seville, Director in the sovereign group at Fitch Ratings, says:
Central and Eastern Europe is by far the most exposed emerging market region to the eurozone crisis owing to strong trade flows, banking sector linkages and, in some cases, portfolio investments, currency risks and substantial gross external financing requirements.
It also placed 41 Italian local governments including Milan, Rome and Italy's wealthiest region, Lombardy, in the north, on "rating watch negative".
16.58 We've more from the IMF now. Currently it estimates 4pc growth in 2012, but Christine Lagarde now says that this will probably be cut due to the eurozone debt crisis.
"I am almost certain... that the forecasts will be revised down" in January, Lagarde told the Niger National Assembly, saying that "clouds building up, especially over Europe, mean we have to lower our outlook."
16.54 Time for the customary end-of-day market graphs.
16.42 The IMF is "almost certain" to cut its 2012 world growth forecast. We'll bring you more on that as it comes in...
16.35 The European markets have now closed for the day, slipping back from initial gains made on news of a massive bank liquidity injection by the ECB faded in unease at the huge amount offered (summed up nicely by Angus Campbell below).
Angus Campbell, head of sales at Capital Spreads, said:
European banks were given an early Christmas present by the ECB today as it provided cheap 3 year loans and before you could say ?quantitative easing? they were massively oversubscribed, dishing out almost ?500 billion. Initially we rallied on the back of the news but then the gains were swiftly reversed as people said: 'hang on a second, if the banks need that much in short term loans they really are in trouble'.
The big question is what will they do with the cash? The thinking is that they?ll buy up Spanish and Italian debt to earn from their hefty yields, help to bring down the countries? borrowing costs and assist in their fiscal rebalancing. The problem is however that if all that renewed exposure to Italian and Spanish debt goes sour, a year or so down the line we?ll be in even bigger trouble than we are now.
16.02 More from Fitch: the credit rating of 14 regional and local authorities are now on "Ratings Watch Negative":
The RWN indicates that the ratings are under active review and are subject to a heightened probability of a downgrade in the near-term. Fitch expects to complete the review by the end of January 2012. If the review concludes that a downgrade is warranted, it is likely be limited to one or two notches.
15.15 BREAKING NEWS...
Fitch says 14 Spanish local, regional governments face possible downgrade.
Adds that French banks need to restore confidence.
15.02 BREAKING NEWS...
US housing data out. Existing home sales were 4.42m (annualised) in November month on month against expectations of 5.05m. Previous month was 4.97m.
Existing home sales revised down by 15pc in 2010 to 4.19m, 16pc in 2009 to 4.34m, 16pc in 2008 to 4.11m and 11pc in 2007 to 5.04m.
14.44 BREAKING NEWS...
Egypt downgraded to B2 from B1 by Moody's and may be cut further.
14.41 The Telegraph's Ambrose Evans-Pritchard as blogged on the European Santa rally: Herr Draghi or Signor Draghi, and the ECB's Santa Rally (technical)
14.36 Ed Conway at Sky is tweeting about Olivier Blanchard, the IMF's chief economist:
IMF Blanchard: substantial fiscal consolidation needed... marathon rather than a sprint. More than two decades to return to prudent debt levels.
14.29 The IFS has commented on the UK borrowing figures (see 09.33). Public borrowing was lower than expected in November at ?15.2bn, but weak growth and eurozone worries threaten UK's attempts to balance the books.
Rowena Crawford, a research economist at the IFS, said:
A simple extrapolation from borrowing so far this year suggests that for the whole of 2011-12 it would come in below last month's forecast by the Office for Budget Responsibility of ?127bn. However, if central government departments were to exhaust their allocated budgets by the end of the year ? as the OBR expects ? then borrowing would be much more likely to come in as forecast.
"Furthermore, while so far overall tax receipts are in line with the OBR forecast, there are risks around this. For example, despite a large downwards revision to their expectations for corporation tax receipts this year in the Autumn forecast, meeting the OBR's projection still depends on strong growth in these receipts over the next four months, which would be a turn-around from the fall in receipts seen so far this year.
14.21 More woe on the high street. Eighteen stores in the collapsed shoe shop chain Barratts Priceless will shut before Christmas, administrators said today.
Barratts stores set to close this week are in Connswater, Kilmarnock, Darlington, Cardiff and Blackpool. The 13 Priceless stores are in Croydon, Durham, Oldham, Strabane, Crossgates, Kettering, Carlow, Donaghmede, Torquay, Weymouth, Kings Lynn, Bexhill on Sea and Erdington.
14.04 The single currency has got a vote of confidence from... Finnish finance minister Jutta Urpilainen.
?I don?t believe in a break-up of the euro and I don?t want it. I can?t see Finland returning to its former currency, the markka, given the benefits the northernmost euro member has had from the single currency."
13.40 We are hearing rumours that the ECB is buying Italian bonds. However, the spread between Italian bonds and German Bunds is widening.
Economic commentator Zerohedge has tweeted:
ECB buying is confirmation LTRO plan has failed. Banks were supposed to be doing this.
12.47 Update on the markets:
FTSE 100 -0.05pc
CAC 40 -0.02pc
DAX +0.08pc
IBEX -0.28pc
MIB -0.29pc
12.33 Telegraph Business has rustled up a collection of the best pictures of 2011 and the biggest heroes and villains of the year.
Mervyn King watching cricket while Europe collapses and Silvio Berlusconi trying to impress the ladies are just two of the highlights. Well worth a look.
12.19 More on the ECB three-year loan action today. Morgan Stanley believes the LTRO only covers 20pc of EU bank delevaging needs - ?2.5 trillion.
MS Bank Del Ever Aging
But IoD chief economist Graeme Leach has welcomed the move:
At last we have a little Christmas cheer. The decision of the ECB to offer unlimited three-year loans at 1pc isn?t a game changer, but it?s the closest we?ve come to one throughout this crisis.
12.14 First the French, now the Germans are having a go at us.
In today?s Die Welt, Editor Michael St?rmer writes:
The loneliness of the British is a bad sign for Europe. The liberal economic forces lose ground vis-?-vis EU-statists. This changes all the equations within the EU, strengthens the development of the Franco-German directorate and weakens the influence of the smaller member states. Germany will become overwhelmed in its role of the irreplaceable yet reluctant hegemon.
12.09 Bad news in the US. After some good housing data yesterday, today it has been announced that MBA mortgage applications fell 2.6pc versus a previous rise of 4.1pc.
Dow still expected to open up 0.3pc.
11.42 Why 2012 could be disastrous for supermarkets:
Evolution Securities says food retailers are opening new stores and expand existing ones at a time when consumer spending is falling.
11.22 Some good news... and it comes from a ratings agency! Fitch says it has a stable outlook for German banks in 2012, as they are benefitting from the resilient domestic economy.
Meanwhile, the BdB Association of German Banks has said that the ECB loans (see 10.23 "are still all emergency measures that can?t replace a functioning interbank market?.
11.14 Need a further indication of how troubled the high street is? Here's Sports Direct's website boldly announcing that its January sale has started... four days before Christmas.
11.05 The French government says they "have no information" of a possible ratings downgrade.
Meanwhile, the Finnish finance minister, Jutta Urpilainen, says his country is committed to keeping its AAA rating and is planning more cuts and tax increases.
11.03 Time for an update on the markets: The FTSE 100 is up 0.6pc, France's CAC 40 is up 1.2pc and Germany's DAX is up 1.1pc. Spain's IBEX and Italy's MIB are both up 0.9pc.
10.59 Mariano Rajoy has taken over as Spain?s prime minister, backed by the strongest majority in three decades, and is preparing to appoint a finance minister, who will be tasked with reordering public finances and creating jobs.
New Spanish Prime Minister Mariano Rajoy is sworn in during a ceremony at the Zarzuela Palace in Madrid on December 21, 2011
Rajoy, whose People?s Party won 185 of the 350 seats in Parliament, is due to name his finance minister and other Cabinet members at 6.30pm.
10.45 The BBC's Robert Peston is tweeting on those figures:
ECB's ?489 three-year loans to stressed eurozone banks is a huge life-support operation, not a cure.
10.41 Analysts are reacting to those ECB figures, which showed more European banks borrowed more money than expected
Martin van Vliet, senior economist at ING:
The take-up of loans is massive, and even higher than in the ECB's first 12-month longer-term refinancing operation (LTRO) of June 2009, which attracted demand of ?442bn. However, the lower number of participating banks (523 versus 1121 previously) suggests that the take-up is currently less widespread - and probably more concentrated in banking systems in peripheral eurozone countries. Today's allotment of three-year loans is equivalent to almost one and a half times Spain and Italy's combined sovereign bond issuance in 2012. However, we doubt whether the money will be used extensively to fund purchases of peripheral debt, given concerns about mark-to-market risks and possible reputation risks.
Annalisa Piazza, from Newedge Strategy:
The take-up was a massive ?489bn, much higher than the expected ?300bn euros. Liquidity on the banking system has now increased considerably. In a nutshell, the three-year auction can been considered as successful in terms of adding liquidity to the banking sector. We believe most of the take up has come from EMU periphery's banks which have more problems with long-term fundings. However, given the large number of banks participating at today's auctions, we cannot rule out some core countries' banks have started to put on some carry positions.
10.38 Those ECB figures (see 10.23) have rocked the bond markets. Below is the 10-year bond market, with the yield the second column from the right and the movement in the last column. Bonds for the EU nations are moving back up, meaning it will be more expensive for those nations to borrow money.
10.32 An interesting UK Christmas spend tracker for while you're shopping for presents online:
10.23 BREAKING NEWS...
523 banks have taken the ECB's three-year loans, with ?489bn tendered (against predictions of ?300bn).
A lot of troubled banks out there.
10.12 Italian banking association ABI sees country's debt at 121.3pc of GDP in 2011, 120.8pc in 2012 and 117.4pc in 2013. And deficit at 3.8pc of GDP in 2011, 1.5pc in 2012 and 0.1pc in 2013.
It also forecasts core tier one ratio of 14 main Italian banks at 9.3pc in 2013 versus 8.5pc in June 2011.
10.05 Just need to slip in some political news. Mark Stone at Sky News has tweeted this pic as he flies with David Cameron:
No coalition when it comes to toilets, then...
10.00 We're getting some reaction from analysts on the MPC figures:
George Buckley at Deutsche Bank:
The minutes show a 9-0 on both the decision on the rates and QE. I think it is interesting that all members are discussing to make up for more QE. If they do more QE in February they are more likely to do ?75bn than ?50bn to keep the weekly run data the same.
Kit Juckes, a curency strategist at Societe Generale:
They are doing QE about as much as they can. They do not need to do more yet and, technically, doing more is quite tricky. When they make their next move, it will be more QE, but in reality you cannot do it at a rate that's disorderly. The MPC is temporarily out of bullets, it's standing by and watching.
09.51 Here are the MPC's minutes in full:
mpc1112[1]
09.33 BREAKING NEWS...
Bank of England MPC minutes released. Decision to hold rates and QE was unanimous. Some MPC members felt more QE might become warranted in due course.
Britain's outlook looked set to remain flat over the last quarter of 2011 and the first half of 2012, with some recovery likely after.
Public borrowing lower than expected in November at ?15.2bn, but weak growth and eurozone worries threaten UK's attempts to balance the books. Treasury spokesman:
These figures show the Government is making good progress on deficit reduction, with borrowing from April to November more than ?10bn lower than in the same period last year. These figures demonstrate the Government's unwavering commitment to dealing with the debts it inherited, despite the euro [crisis] and market turbulence.
09.32 A Reuters poll has concluded that the take-up of ECB three-year loans will total ?310bn.
09.22 Further to that ECB action today, 14 Italian banks have listed ?38.4bn of state-guaranteed bonds ahead of the three-year loan programme, according to the Italian Bourse.
09.17 Two pieces of breaking EU news.
Germany says it plans to borrow ?250bn from markets next year.
Spanish 10-year bond yields have fallen below 5pc. This means that the country's borrowing costs have fallen, too, instigated by the ECB's loan action today.
09.14 Jens Stoltenberg, Prime Minister of Norway, has said that his country has given 55bn krone (?6bn) to the IMF... and they aren't even in the EU.
09.08 Earlier this morning we had a profits warning from Thorntons, now restructuring firm AlixPartners has said that retail insolvencies may reach the highest level in four years.
This will be caused by weak Christmas sales leaving chains struggling to meet rent payments due this month.
?We are likely to see a number of retail collapses early in the new year and it could include some much-loved names,? Sanjay Bailur, managing director of the advisory firm?s UK unit, said in an interview. The outlook is ?worse than the last three or four years?.
09.01 BREAKING NEWS...
Italian GDP contracted by 0.2pc in the third quarter. Previous quarter saw 0.3pc growth.
Figures signal that the country may have entered its fifth recession since 2001 as the government adopts new austerity measures that will further weigh on growth.
09.00 Michael Hunter at the FT tweets on something we are all hoping for this Christmas:
All over Europe, wide-eyed, glistening children are looking at the skies in wonder and asking "is today the day the Santa rally is coming?"
08.52 Risks for European insurance companies from the current debt crisis have increased in the past six months and up to eight groups failed so-called "stress tests", a new report has shown.
In a twice-yearly report on financial stability in the insurance and occupational pension fund sectors, the European Insurance and Occupational Pensions Authority found that risks in the sector "are at high levels, and are more pronounced than the first half of 2011".
08.50 The BBC's Robert Peston is tweeting on the EU:
What happens to eurozone banks when they run out of assets pledge to central banks and other secured lenders?
08.19 Here's a worrying graph (aren't they all?) on UK GDP/consumer confidence:
08.02 In his daily email, Telegraph City Editor Richard Fletcher has focused on the release of the MPC minutes at 9.30am this morning:
07.44 Meanwhile, back to the East. China's national pension fund, the National Council for Social Security Fund, has injected 10bn yuan (?1bn) into the domestic stock market through other funds cleared on Friday to manage the investment, the Shanghai Securities News has reported.
07.21 Today, the European Central Bank is expected to report strong demand for an offer of unlimited three-year loans after banks were urged to take the funds as part of concerted efforts to ease severe pressure across the eurozone.
The ECB announced the emergency three-year loans, known as longer-term refinancing operations, or LTROs, earlier this month, in an attempt to help banks overcome ?720bn-worth of funding due to mature next year
07.15 Elsewhere, in the Guardian, Business Secretary Vince Cable has attacked the "whingeing" City, adding that the Government will ignore the bankers' pleas and make the economy less dependent on a sector that has caused "immense damage" to Britain.
07.11 Quick bit of corporate news, and it's all Japan this morning. HSBC is selling its private banking business in the country to Credit Suisse.
06.57 The Asian markets are doing well. Over in Europe and the US, the FTSE 100 is expected to open up 0.5pc and the Dow is predicted to open up 0.1pc
06.55 The Japanese government now expects 2011 real GDP to shrink by 0.1pc, against an earlier predicition of a 0.5pc contraction. They expect 2012 real GDP to grow 2.2pc against 2.7pc prediction.
Tokyo-based Ratings & Investment Information has cut Japan?s sovereign ranking for the first time, citing ?uncertain? prospects for economic recovery.
R&I lowered Japan?s foreign and domestic currency issuer ratings one step to AA+ from AAA.
06.51 The big stories this morning are Japan's central bank warning that its economic recovery has paused:
The pick-up in Japan's economic activity has paused, mainly due to the effects of a slowdown in overseas economies and of the appreciation of the yen.
and Japanese prosecutors raiding the headquarters of Olympus.
We apologise deeply again for the great troubles and worries we have caused our shareholders, investors, customers and others.
06.44 While Philip Aldrick brings us back to earth with a warning from ratings agency Moody's that Britain's credit rating could be cut if growth stalls:
Demonstrating how vulnerable the UK is to a downgrade, Moody's based its prognosis on growth in 2012 of 0.7pc ? in line with the official forecast, but more optimistic than both the Organisation for Economic Co-operation & Development's prediction of 0.5pc and the contraction expected by a swelling group of City forecasters.
Deutsche Bank on Tuesday added to the sense of doom by slashing its outlook for growth next year to "zero" and warning of a "modest technical recession".
06.35 Ambrose Evans-Pritchard and Louise Armitstead describe the Euroland euphoria sweeping across the region as Southern Europe basks in a blast of cheap liquidity from the European Central Bank:
Exuberance lifted Germany's DAX index by 3pc, the French CAC by 2.7pc, and FTSE 100 by 1pc, with ripple effects through commodities and risky assets worldwide.
The buying spree comes as markets wait for the ECB to turn on the monetary spigot. Funds are betting that an offer of unlimited bank credit for three years ? long-term repo operations (LTROs) ? will transform the underlying dynamic of Europe's debt crisis. Banks will be able to borrow at 1pc to buy Spanish and Italian bonds at 5pc or 6pc. It allows the ECB to prop up sovereign states without violating EU treaty law.
06.23 Here's how this morning's papers view the business world:
Telegraph: Euroland euphoria on Mario Draghi bank rescue
Financial Times (?): Strong take-up of ECB loans expected
Guardian: Vince Cable attacks 'whinging' City
The Times (?): Kim's lethal legacy
06.15 Good morning and welcome back to live coverage of the global debt crisis.
Debt crisis live: archive
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