Greek unemployment could cause 'social crisis' – business live

And over to Greece again where the government is now saying it hopes to reach enough consensus with mission chiefs representing the troika to get stalled negotiations moving again. Helena Smith reports:

As government leaders dig in for another round of strategising ahead of tomorrow’s Paris meeting, officials are expressing optimism that a deal can finally be sealed.

Addressing reporters earlier today, the Greek government spokesperson, Sophia Voultepsi, said she believed an agreement could be struck in time for December 8 when euro area finance ministers hold their last eurogroup meeting of the year.

“The important thing is that a decision has been taken to get the process moving again,” she said in what appeared to be a deliberate bid to take the heat out of talks that have been unusually bitter. “We are going there to seal an agreement so that we can make it in time for [the eurogroup] on December 8,” she told a local radio station. The aim, she said, was to exit the EU-IMF bailout programme by the end of the year. A European spokeswoman confirmed that view, saying the conclusion of the review was now of uppermost significance.

But with tensions running high – and the prospect of yet more nail-biting austerity not ruled out, despite official denials – the radical left main opposition Syriza party issued a hard-hitting statement saying the talks were doomed to fail. With the leftists leading in opinion polls, any agreement would be effectively relogated to the dustbin of history if, as many believe, snap polls are held early next year.

“The government’s meeting with the troika in Paris is the last episode in the soap opera of the supposed exit from the memorandum,” the party said in a statement. “The government that is collapsing cannot commit the Greek people to a new bailout agreement because this will be cancelled in practice by people’s votes.”

Piling the pressure on the government, air traffic controllers announced that they too will join a massive general strike this Thursday which will add to the chaos Greece will likely experience that day.

On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back tomorrow.

Following Jens Weidmann’s remarks, comes a more dovish tone from ECB board member Benoît Cœuré:

The comments from Bundesbank president and ECB council member Jens Weidmann that additional measures from the central bank could run into legal difficulties have given the euro a lift.

The single currency rose 0.3% against the dollar to $1.2431 and 0.9% against the yen to 147.18 yen. And here’s Reuters full take on Weidmann’s remarks:

The European Central Bank could encounter “legal limits” if it pursued additional steps to combat low inflation, the president of Germany’s Bundesbank said on Monday, calling for a focus on growth rather than any government bond buying.

“Instead of focusing on the purchasing programme, we should focus on how you find growth,” Jens Weidmann told an audience in Madrid, when asked about the possibility of the ECB buying government bonds, a step known as quantitative easing.

He warned that it would be difficult to pursue such steps to tackle low inflation.

“Of course there are other measures which are more difficult, because they are untested, because they are less clear ... and of course they hit the legal limits of what you can do,” said Weidmann, who sits on the ECB’s Governing Council.

“This is why discussions are so intense,” he added.

Back in the US, and there has been a reasonably positive manufacturing survey from Texas.

The Dallas Fed’s monthly manufacturing index for November showed that general business activity came in at 10.5, the same level as in October and better than the forecast dip to 9.

But the production index, a key measure of manufacturing conditions, fell from 13.7 to 6, indicating output growth slowed in November.

Full report here.

Markets may have been rallying partly on ECB president Mario Draghi suggesting the central bank will act to combat deflation and boost the flagging eurozone economy, but that does not mean the differences within the bank’s board has gone away. The Germans in particular have been far from keen on the ECB going too far in any QE or bond buying programme.

Now, speaking in Madrid, ECB member and Bundesbank president Jens Weidmann has said monetary policy could influence short term demand, but to boost growth, structural reforms were necessary.

And he has again (courtesy Reuters) made negative comments about any bond buying programme:

• 24-Nov-2014 15:10 - ECB’S WEIDMANN SAYS FOCUS SHOULD BE ON ECONOMIC GROWTH RATHER THAN ANY GOVERNMENT BOND PURCHASING PROGRAMME
• 24-Nov-2014 15:18 - ECB’S WEIDMANN SAYS ADDITIONAL ECB MEASURES TO TACKLE LOW INFLATION ARE MORE DIFFICULT AND ENCOUNTER LEGAL LIMITS

More from Markit’s chief economist Chris Williamson on the latest US survey:

After the manufacturing PMI showed factory output growth slowing in November to the lowest since January, the weaker pace of service sector expansion puts the economy on course to grow at a 2.5% annualised rate at best in the fourth quarter. With extreme weather hitting parts of the country, growth could slow even further.

However, growth has merely eased from very strong rates earlier in the year. Importantly, even the slower rate of growth signalled by the PMI surveys remains sufficiently strong to generate robust numbers of new jobs. Firms took on staff at a rate consistent with another increase in payroll numbers of roughly 200,000 in November.

The worry is that any hiring intentions could rapidly deteriorate if firms’ order book inflows fail to pick up again soon.

The full report is here:

Weakest rise in service sector business activity since April

And here are the US surveys, showing a slowdown in growth so far in November.

In the service sector the preliminary reading from Markit’s purchasing managers index fell from 57.1 in October to 56.3, below expectations and the lowest reading since April. Chris Williamson of Markit said:

A fifth consecutive monthly slowing in growth in the service sector adds to signs that the economic upturn has lost considerable momentum, though it is important to note that the pace of expansion remains robust by historical standards.

Meanwhile the flash composite PMI, a weighted average of the manufacturing and services surveys, fell to 56.1 in November, down from 57.2p last month.

Wall Street has opened in positive territory, ahead of US composite purchasing managers figures due shortly.

The Dow Jones Industrial Average is currently up 28 points or 0.16%.

The Bank of England has appointed Deloitte to investigate the embarrassing collapse of its realtime gross settlement service last month.

That IT outage crashed the BoE’s CHAPS system - used to complete house purchases - preventing scores of people from moving home.

Hmmm... shares in Smith & Nephew, the FTSE 100-listed UK medical devices firm, have jumped by 5% in the last few minutes.

This is prompted by a report on Bloomberg that US rival Stryker is ‘examining’ a potential bid for S&N. Back in May, Stryker ruled itself out from bidding for six months, but it could come back to the table soon....

Back in the markets, the euro is bobbing around a two- year low at $1.241 to the US dollar.

The surprise improvement in German business confidence only gave the euro a small lift this morning.

Traders are more interested in last Friday’s speech by Mario Draghi, in which the ECB chief dropped various dovish hints about taking more stimulus action, if needed.

Edward Knox, currency analyst at Caxton FX, explains:

This morning’s surprise revelation that German business confidence improved in November has provided the beleaguered euro zone with an isolated spot of good news.

The Germans can take some positives from the fact that the decline in their business sector seems to have come to a halt, however the good news from Europe’s largest economy has failed to whet investor demand for the euro.

The single currency is continuing to drift after Draghi appeared to pave the way for full blown QE in a speech on Friday by saying that he will do “whatever it takes” to raise inflation.

It is becoming evident that the euro will continue to be the currency equivalent of the whipping boy until they can demonstrate some sustained growth and exit this deflationary spiral.

I imagine Draghi will be quite happy to see the euro being pummelled; a weak currency should provide some inflationary pressure and help struggling exporters.

If BT does buy back O2 (or acquire EE instead) it will end a thirteen-year hiatus without its own mobile network operator.

The decision to spin off its wireless arm in 2001 feels like a blunder, given how mobile has exploded since (fastFT dub it “one of the worst strategic errors in UK corporate history”). BT, though, was under huge pressure to cut its £30bn debt pile.

But how smart was Telefonica’s decision to take over O2 in 2005 for over £17bn?. A 20% stake in BT (rumoured to be the price of the deal) would be worth around £6bn today (although presumably BT would be worth billions more more more once O2 is added...).

[Update: that £17bn price-tag did also cover O2’s assets in Germany and Ireland, so straight comparisons may be unfair]

The improvement in German business confidence reported by IFO today suggests its economy is improving, says Christian Schulz, senior economist at Berenberg bank.

Schulz explains:

The situation in Eastern Ukraine remains volatile and important trade partners like France and Italy continue to stagnate. But the evidence that German business confidence and thus investment has passed the trough is mounting, supporting our call that Germany and the Eurozone will be back to trend growth rates from the second quarter of 2015 onwards.

And that may cut the chances of the ECB launching a full-blown QE programme, and starting to buy eurozone government debt, Schulz adds:

For the ECB, the upturn in German business confidence signals that the window of opportunity for large- scale additional easing might start closing after the winter if Germany and the Eurozone return to trend growth.

And this chart from Reuters shows how the IFO index has finally risen after declining for six months.

Hans-Werner Sinn, the head of IFO, reckons that today’s survey shows the decline in Germany’s business sector has bottomed out:

“The downturn in the German economy has ground to a halt for the moment at least.”

“Assessments of the current business situation are slightly more favourable than last month,”

European stock markets have risen, as traders welcome the first rise in the German business climate since April.

The French CAC is up 0.95%, while the German DAX has gained 0.57%.

This increase in German business confidence this month is an encouraging sign, says IFO economist Klaus Wohlrabe.

Wohlrabe reckons the German business climate is benefitting from the lower euro and cheaper oil. Firms are also shrugging off the Ukraine crisis, and recent transport strikes, he adds.

It’s too early to call a turnaround in Germany’s business climate, he concludes. But if December’s survey shows another improvement, it could herald faster growth in 2015.

Bloomberg is reporting that Greece’s government will hold talks with its lenders tomorrow, in Paris, in an attempt to reach a breakthrough over its bailout programme.

As we covered extensively last week, the two sides disagree over Greece’s financial health.

Athens denies that it faces a fiscal gap of up to €3bn next year, and has now tabled a budget without the troika’s approval.

The deadlock is hampering Greece’s efforts to exit the European portion of its bailout next year; the Kathimerini newspaper reckons there could be an ‘emergency budget’ in December to get a deal done.

Shares in Friends Life have jumped 7% to 373p as investors respond to the £5bn takeover approach from rival life assurance firm Aviva.

Aviva’s shares are down 3.8% in early trading, at 519p.

The two company’s boards have agreed terms on a possible deal, in which Friends shareholders get 0.74 Aviva shares for each Friends one they own (which currently values each Friends share at 384p, at pixel time)

A range of threats have combined to drive global business confidence down to a five-year low.

The firms surveyed by Markit cited:

“fears of a worsening global economic climate, and notably a renewed downturn in the Eurozone, the prospect of higher interest rates in countries such as the UK and US next year, geopolitical risk emanating from crises in Ukraine and the Middle East, plus growing political uncertainty in many countries, notably the US, UK and Japan.”