FTSE 100 -0.9pc
CAC -0.8pc
DAX -0.7pc
IBEX -0.6pc
MIB -1.1pc
Ilya Spivak, currency strategist at DailyFX:
European shares are showing mixed results in early trade as markets continue to tread water ahead of Greece’s election outcome on Sunday. While seesawing sentiment has produced no concrete direction thus far this week, the return of risk aversion appears likely as the weekend nears, with traders turning defensive amid fears that a vote against bailout-friendly parties will lead Greece out of the eurozone.
09.35 Italy is holding a bond auction later today. Will be interesting to see the interest rates.
10-year yield at 6.292pc.
09.02 A new audit of Spanish banks is expected to uncover capital needs of between €60bn and €65bn, ABC reports, citing a preliminary draft of a report by auditors Oliver Wyman and Roland Berger.
The Spanish government has requested up to €100bn in EU aid to recapitalize its ailing banks and has asked for the external assessment to help determine exactly how much they need. The results of the audit are due later this month.
Meanwhile, Spain's banks borrowed €287.8bn from the ECB in May versus €263.5bn in April. That's a new record.
08.56 The FT in Germany has reported that Economic and Monetary Affairs Commissioner Olli Rehn is staying in Brussels instead of attending the G20 in Mexico on Monday.
08.54 Jose Garcia Margallo, Spain's foreign minister, has say it would be a catastrophe if Spain "left Europe".
He calls on the ECB to ease market tension. Adds that Germany should have take a longer view of the crisis.
If they throw one country to the wolves that will affect everyone, so they should have longer-term vision.
08.36 Merkel: "Don't overestimate Germany's ability to save the euro... The debt crisis will be the main issue at the [G20] summit. Our country will be the centre of attention - it's a fact, all eyes are on Germany because we are the biggest European economy and a major exporter."
She adds that the US must reduce its budget deficit. Spain shows EU bank stress test failed.
08.32 Swiss National Bank maintains French ceiling of 1.20 versus euro. SNB ready to buy unlimited quantities of foreign currencies, says further franc gains would have a serious impact and it "will not tolerate" this.
SNB says Switzerland will experience economic slowdown. "Essential" that Credit Suisse to boost capital in 2012.
08.22 German Chancellor Angela Merkel says the IMF must be ready at all times to step in. She adds that the lack of a political union has led to debt mounting, addressing EU union is a "Herculean task" but is necessary.
Merkel says Germany is strong, willing to help Europe and the world. Europe should not opt for quick and easy solution to crisis. Policies are made for citizens, not markets. Spain was right to seek aid for banks as it needed to deal with the consequences of a property bubble. Spanish crisis due to "irresponsible" decade.
She adds that Europe needs more independent supervision of banks and the ECB should take a bigger role.
08.18 European markets have opened. The FTSE 100 is flat, the CAC is up 0.1pc, the DAX is down 0.1pc and the MIB is up 0.1pc
08.15 BREAKING NEWS...
Spanish 10-year bond yields pass 6.9pc.
08.13 Greece's labour and social insurance minister Antonis Roupakiotis has said the interim government can guarantee pensions for July, but not beyond that.
He confirmed that social insurance fund finances were in a poor state and that the largest social insurance fund IKA would need €1.4bn from the state budget to pay for pensions, while the Manpower Employment Organisation would need a further €260m to pay unemployment benefits, despite the fact that only one in five unemployed received unemployment benefit.
08.08 French President Francois Hollande: "Europe is entering a new stage. No more just two people taking all the decisions."
He also warned Greeks that if they vote to move away from international bailout commitments in the upcoming election, they could be pushed out of the eurozone.
I respect the Greek people. They will decide what they want on the occasion of the election. But I must warn them, because it is my duty, because I am a friend of Greece, that if the impression is given that the Greeks want to move away from the commitments that were taken and abandon all prospects of revival, then there will be countries in the eurozone that will want to end the presence of Greece in the eurozone.
08.04 The IBEX has fallen 0.5pc on opening. Spanish bond yields hit euro-era high this morning of 6.886pc. Meanwhile, new figures show house prices in Spain fell 5pc in the first quarter month-on-month and 12.6pc year-on-year - the biggest annual decline on record.
07.47 Quick bit of breaking corporate news. Nokia is to cut 10,000 jobs by the end of next year.
As part of the overhaul, sites in Finland, Germany and Canada will be closed.
Nokia’s handset shipments fell by 24pc in the first quarter, and the company now says second-quarter operating margins at the devices arm will be worse than a loss of 3pc of revenue in the first quarter.
Shares slump to lowest since September 1996.
07.42 Steve Collins, global head of dealing at London & Capital Asset Management:
07.35 The Guardian has reported that analysis by Credit Suisse estimates that up to 58pc of the value of Europe's banks could be wiped out by the departure of the "peripheral" countries.
Few large eurozone banks would be left standing and the banking sector could face a €370bn (£298bn) loss if the euro crisis results in the single currency bloc breaking apart, according to one of the first in-depth analyses of what might happen if the eurozone disintegrates.
07.28 German wholesale price index falls 0.7pc (month-on-month) in May after a 0.5pc rise in April. Not a good start to a day that sees the release of data on Spanish house prices, Italian Government debt, EU and US inflation and US jobless claims.
07.25 BREAKING NEWS...
Spanish 10-year bond yields have jumped to a new euro-era high of 6.886pc this morning, following the Moody's downgrade.
Italian yields are up five basis points to 6.237pc.
07.23 French finance minister Pierre Moscovici says his country will stick to deficit reduction targets in 2012 and 2013, ading that it will be possible to hit them without austerity.
France has made a commitment to its partners to reduce the deficit to 4.5pc in 2012 ... and 3pc in 2013. We will meet these targets.
07.20 Asian stock markets have fallen this morning on signs that the problems in Greece and Spain could spread to Italy.
Japan's Nikkei 225 index slipped 0.2pc, Hong Kong's Hang Seng dropped 0.9pc and South Korea's Kospi lost 0.1pc. Mainland Chinese shares were mixed.
Italy's 10-year borrowing rate rose to 6.07pc yesterday, and the interest rate on its one-year bonds also jumped.
Japan on Thursday revised down its factory output data for April, showing a slight contraction that underscored the nation's anaemic factory activity.
Industrial production slipped by 0.2pc rather than growing by 0.2pc month-on-month due to lower-than-expected output of electronic parts, cosmetics and some beverages including iced and canned coffee, the economy, trade and industry ministry said.
07.18 Meanwhile, the tide continues to turn in Europe, with Germany beginning to open the door to shared debts for the first time in a profound change of policy. Ambrose Evans-Pritchard reports:
“It is conceivable so long as there is proper supervision of tax revenues,” said a source in the Chancellor’s office. The official warned that there would be no “master plan” or major break-through at the EU summit later this month.
Mr Merkel rejected the Redemption Pact last November as “totally impossible”, even though it was drafted by Germany’s Council of Economic Experts or Five Wise Men and is widely-viewed as the only viable route out of the current impasse.
07.16 Moody's wasn't the only one doing the downgrades last night. Earlier in the evening, Egan-Jones (not one of the big three), sent Spain deeper into its "junk" pile, slashing its rating to "CCC" from "B". S&P, Moody's and Fitch still rate Spain at investment grade.
07.11 You can read Moody's statement in full here.
07.10 In a statement last night, the rating agency said:
The decision to downgrade the Kingdom of Spain's rating reflects the following key factors:
1. The Spanish government intends to borrow up to EUR100 billion from the European Financial Stability Facility (EFSF) or from its successor, the European Stability Mechanism (ESM), to recapitalise its banking system. This will further increase the country's debt burden, which has risen dramatically since the onset of the financial crisis.
2. The Spanish government has very limited financial market access, as evidenced both by its reliance on the EFSF or ESM for the recapitalisation funds and its growing dependence on its domestic banks as the primary purchasers of its new bond issues, who in turn obtain funding from the ECB.
3. The Spanish economy's continued weakness makes the government's weakening financial strength and its increased vulnerability to a sudden stop in funding a much more serious concern than would be the case if there was a reasonable expectation of vigorous economic growth within the next few years.
07.00 The downgrades just keep on coming. A week after Fitch slashed Spain's credit rating to two notches above "junk" status, Moody's last night cut the country to just one notch above junk.
What's more, the rating agency said that it could throw Spain into the junk pile within three months, as it placed the country under review for another downgrade.
06.45 Good morning and welcome back to our live coverage of the European debt crisis.
Iain Duncan Smith: poverty is not solved by just more money - Daily Telegraph
Figures to be published today are expected to show that the Government failed to meet its statutory target to halve the problem by 2010 – despite the huge amount of taxpayers’ money spent on tackling it.
Mr Duncan Smith will unveil a new analysis which will show that hundreds of thousands of children will be lifted out of poverty if at least one of their parents works 35 hours a week earning the minimum wage.
The introduction of the universal credit, under the Government’s welfare reforms, will mean that people returning to work from benefits will continue to receive some state support.
Any child living in a household which earns less than 60 per cent of the typical income is defined as living in poverty. This is likely to be changed so that children living in workless households or those with drug-dependent parents are highlighted.
Mr Duncan Smith will also set out plans to change the definition of child poverty so that a more sophisticated analysis is used.
Speaking ahead of his speech at the Abbey Community Centre in London, Mr Duncan Smith told BBC Radio 4's Today programme: "What I'm talking about is getting away from a system that got so trapped in the idea of meeting a relative income target so narrowly that more and more money was spent on welfare but keeping people out of the work process.
"What we need to do is make sure we tackle poverty but tackle it in the process of trying to move them on (to work).
"If you just measure relative income levels you know nothing about what's happening to the family."
In his speech, he will accuse Labour of “pouring vast amounts of money” into increased benefit payments to tackle poverty. He is expected to say that the strategy has failed and parents need to be helped back to work rather than simply subsidised by the state.
He will say: “Getting a family into work, supporting strong relationships, getting parents off drugs and out of debt — all this can do more for a child’s wellbeing than any amount of money in out-of-work benefits.
“With the right support, a child growing up in a dysfunctional household, who was destined for a lifetime on benefits could be put on an entirely different track — one which sees them move into fulfilling and sustainable work. In doing so, they will pull themselves out of poverty.”
He will add: “Our latest analysis suggests that universal credit will ensure the vast majority of children will be lifted out of poverty if at least one parent works 35 hours a week at the minimum wage — or 24 hours if they are a lone parent.
“For those who are able to work, work has to be seen as the best route out of poverty. For work is not just about more money — it is transformative. It’s about taking responsibility for yourself and your family.”
Mr Duncan Smith will indicate that Labour wasted large amounts of public funds as it failed to halve child poverty. “The last Government spoke about the need to tackle poverty, and poured vast amounts of money into the pursuit of this ambition — £150 billion was spent on tax credits alone between 2004 and 2010.
“Overall, the welfare bill increased by some 40 per cent in real terms, even in a decade of rising growth and rising employment,” he will say.
Ministers are drawing up plans to introduce a series of measures to gauge whether families are living in poverty, such as whether parents have drug or alcohol problems or whether they are working.
In today’s speech, the Work and Pensions Secretary is expected to defend the need to change the definition of child poverty. “If a family has less than 60 per cent of the median income it is said to be poor, if it has 60 per cent or more it is not,” he will say.
“By this narrow measure, if you have a family who sits one pound below the poverty line you can do a magical thing. Give them one pound more, say through increased benefit payments, and you can apparently change everything — you are said to have pulled them out of poverty. But increased income from welfare transfers is temporary if nothing changes.”
Mr Duncan Smith’s call for disadvantaged families to return to work may come at an inopportune time with unemployment rising as the double-dip recession has led to a lack of jobs.
William Hague, the Foreign Secretary, caused controversy recently by telling Britons they had to work harder to help the UK escape from recession.
Fitch Gives Nod to Indonesia's New Consumer Financing Rules - thejakartaglobe.com
Fitch Ratings on Thursday said new consumer finance rules in Indonesia that cap the maximum loan-to-value on auto loans and mortgages are likely to improve underwriting quality and slow lending growth.
The consumer finance regulations — set to come into force on Friday — stipulate a minimum down payment for automobiles of 25 percent for loans from financing companies and 30 percent for loans from banks, Fitch said in a written statement. The requirements will apply to home loans as well.
Some finance companies were offering motorcycle loans with no down payment required, leading to an increase in delinquencies. As a result, the central bank and Finance Ministry are concerned that poor underwriting has resulted in a deterioration in asset quality at some finance companies.
The international ratings agency said the impact of the new rules would be felt mainly on non-bank finance companies, which are more active than banks in higher-risk lending.
It also said the rules are unlikely to trigger a drop in bank lending because most banks have already imposed maximum loan-to-value ratios of 70 percent to 80 percent. The finance industry has been growing at a compounded annual growth rate of more than 30 percent in the last three years and Fitch said it expected this to slow but remain high, at 20 percent to 25 percent.
Financing companies account for approximately 10 percent of total banking system assets. However, because 70 percent of their lending is to consumers, they have a significant effect on that market. The finance industry is also allowed to provide mortgages to consumers, but only a handful of finance companies offer these products.
The central bank, Bank Indonesia, has been proactive in issuing new regulations to prevent a deterioration in consumer-financing asset quality, and to curb inflation. In January, it set new rules for credit cards with the aim of reducing risk in that industry, where default rates have been increasing.
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