There was a certain amount of support for stock markets from the prospect of possible European Central Bank measures to bolster the flagging eurozone economy and avoid deflation. But optimists hoping for action at next week’s meeting may be disappointed, with any move more likely in the new year. With some disappointing US data, there was not much else to enthuse investors and the day ended as a pretty mixed bag ahead of US Thanksgiving and this week’s meeting of the Opec oil cartel. The final scores showed:
The FTSE 100 finished down just 1.97 points or 0.03% at 6729.17
Germany’s Dax climbed 0.55% to 9915.56
France’s Cac closed 0.2% lower at 4373.42
Italy’s FTSE MIB edged down 0.36% to 19,938.42
Spain’s Ibex ended 0.49% adrift at 10,647.0
On Wall Street the Dow Jones Industrial Average is currently 8 points or 0.05% lower.
On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back again tomorrow.
Back to the breakdown of those talks between Greek government officials and Troika officials in Paris. Our correspondent Helena Smith reports:
Barely hours after their seeming collapse, the Greek finance minister Gikas Hardouvelis has gone out of his way to put a positive spin on the Paris talks. The economics professor informed reporters in the French capital that things weren’t as bad as they looked. Progress, he insisted, had been made on several fronts even if agreement had not been struck and a date settled for the auditors’ return to Athens.
Greek finance minister Gikas Hardouvelis. Photo:AP/Thibault Camus
“There was convergence on many issues,” he was quoted as saying. Echoing that view, the European Commission’s chief inspector Declan Costello, called the talks “intense and constructive.” Disagreement, once again, had centred on projections for next year’s fiscal gap. Lenders argue it will be at least €2.5bn – far greater than the €350m now estimated by the Greek government - and, they claim, impossible to cover without further measures.
Insiders said bleary-eyed participants (discussions lasted a marathon 11 hours ending at around 4 AM today) would go back to Greece in upbeat mood that negotiations that have come to be the hardest yet had “moved forward” in some respects.
Talks had focused on labour relations, pensions and administrative reforms – creditors are demanding that the country’s loss-making pension system, in particular, be overhauled. Digging in its heels, the Greek side said further cuts would only backfire. “We are confident a date for the auditors return will be agreed shortly,” said one official denying the negotiations had effectively collapsed. “This round [of negotiations] is especially strenuous precisely because it is the last.”
Junkcer at least recognises there is a need to act, but there are problems with the scheme, writes Larry:
The first drawback with the Juncker plan is that there is only €20bn (£15bn) of new money, with the rest coming from the private sector. Brussels will provide guarantees should any of the investments in roads, railways, energy projects or a speedier internet go pear-shaped. Some critics have already dubbed this highly leveraged scheme as Juncker’s version of subprime mortgage debt.
In reality, Brussels has had little alternative but to provide seedcorn cash and hope it will generate private sector involvement. Between them Britain and Germany have ensured that the commission’s budget remains tiny. Juncker simply does not have the funds available for a big increase in public spending. Given that the eurozone is a €13tn economy, what’s on offer is pretty small beer.
The second drawback is that the investment – even assuming it happens – will take time to arrive. Every European Union country has sent in a list of pet projects and these will have to be assessed by a panel of experts before a final list can be drawn up. This is a recipe for bureaucratic delay and the customary horse-trading as each country demands its share of the action. It is unlikely work on a single project will begin until 2016, when what Europe needs is an immediate boost to demand.
And here’s the latest Reuters take on the Greece talks in Paris:
Greece and its EU/IMF lenders failed to resolve differences over next year’s budget at talks in Paris, a Greek official said on Wednesday, raising doubts about whether Athens can meet a deadline to wrap up its bailout programme.
The two sides have been haggling over a projected budget shortfall next year, which has held up an overall deal on the final bailout review. Athens needs to strike that deal by a December 8 deadline to ensure it makes good on a pledge to quit its €240bn ($300bn) bailout by the end of the year.
The official said there had been no discussion of extending the bailout beyond the end of the year, but also added that no date had been set for the return of EU/IMF inspectors to Athens.
The inspectors failed to return to Athens as expected earlier this month and in a surprise move, the two sides held talks in Paris this week that ended on Wednesday.
“The number one issue is the fiscal gap for 2015,” the Greek finance ministry official told reporters after the talks ended.
The lenders say Athens faces a shortfall of over €2bn next year unless it waters down a generous state arrears payback plan for austerity-hit Greeks or takes other measures.
Athens says it faces no such shortfall and last week submitted its plans for a near-balanced budget to parliament without approval from the inspectors.
Greece’s government has staked its survival on abandoning the bailout. It is hoping an early exit from the reviled programme will help it win enough support to scrape through a presidential vote in February and avoid early elections.
The next splurge of US data shows a mixed picture, with consumer sentiment up, Chicago manufacturing activity slowing and house sales disappointing.
US consumer sentiment rose in November to its highest level in more than seven years. The Thomson Reuters/University of Michigan’s final reading came in at 88.8, up from 86.9 in October but below the preliminary estimate of 89.4.
Survey director Richard Curtin said:
Consumers more frequently reported hearing about positive rather than negative economic developments in the November survey, with reports of improving employment the dominant news item.
Meanwhile the pace of business activity in the midwest slowed in November. The ISM Chicago business barometer fell from 66.2 in October to 60.8, below expectations of a figure of 63.
Philip Uglow, chief economist of MNI Indicators - which publishes the report in partnership with ISM-Chicago - said:
Following the sharp rise in the barometer to a one year high in October it wasn’t too surprising to see activity ease somewhat in November. Overall the trend remains firm and activity looks set to pick up in the fourth quarter from the third.
Chicago ISM confidence index
Finally sales of new single family homes rose for a third straight month in October, up 0.7% to an annual rate of 458,000 units compared to expectations of a figure of 472,000.
And September’s number was revised down from 467,000 to 455,000.
The US data so far (there is more to come shortly in the form of housing, confidence and Chicago manufacturing) was not particularly re-assuring, says Rob Carnell at ING Bank:
[The data] sheds some doubt on the positive message delivered by the previous day’s upwards GDP revisions.
October durable goods orders, for which the key focus is the core goods orders ex-defence and ex-aircraft, dipped 1.3% month on month, taking the three-month annualised trend down from 11.2% in September, to only 2.7% in October. Core capital goods shipments also declined, though not as much. These two categories usually give a rough approximation to quarterly business investment in equipment and software published in the GDP data. This is therefore a weak start to the fourth quarter.
Adding to a weak set of orders data, the latest weekly initial jobless claims figure spiked higher too, rising from 292,000 to 313,000, and confirming that the last month has seen a reversal in the recent downtrend. Our suspicion is that this will be short-lived. We saw a similar spike in November last year. But it doesn’t help when all the other data are also looking a bit soft. We will need to see claims data dip sharply down in the coming weeks if we are not to begin to doubt the resilience of the recovery in the labour market.
Personal income and spending data were also disappointing, which also raises doubts about fourth quarter 2014 GDP (was already looking challenged) though there were some upwards revisions to the spending numbers that soften the blow a little. The September spending figure was revised to flat from -0.2%, so the undershoot of the October 0.3% consensus estimate by 0.1 percentage point isn’t as bad as it first looks, but in no way suggests a strong rebound from the limp 2.2% annualised consumer spending growth recorded in the third quarter.
These data may well explain why consumer confidence data took an unexpected dive in November, though there may also be some distortion showing through from the recent mid-term elections. Expectations of Fed tightening next year will doubtless be trimmed in the light of this data, sapping some support for the US dollar.
US initial jobless claims & durable goods orders released
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A swath of economic data from across the Atlantic just hit the wires, as Americans clear the decks ready for Thanksgiving tomorrow.
And they show that the number of US citizens signing on for unemployment benefit has hit the highest level since September, according to data just released.
The Labor Department reports that the initial claims total rose to 313,000 last week, a gain of 21,000.
The less-volatile four-week moving average remained below 300,000, though, suggesting the US jobs market is still recovering. And the number of ‘continuing claims’ (rather than new applications for benefits) hit a new 14 year low.
*CONTINUING CLAIMS IN U.S. FALL TO LOWEST LEVEL SINCE DEC. 2000
And separately, US durable goods orders have beaten forecasts, with a rise of 0.4% last month.
That’s much stronger than the 0.6% fall which was pencilled in by Wall Street. However, the increase was mainly due to transportation orders - strip out orders for aeroplanes and engines, and durable goods were actually down by 0.9%.
US durable goods orders rise 0.4% in October (-0.9% in September), well above RT consensus of a 0.6% decline
Lunchtime summary: Fears over unbalanced UK recovery
Time for a lunchtime recap.
Economists fear that the UK economy remains dangerously unbalanced after the second estimate of UK growth in the third quarter of 2014 was released, showing businesses cut their investments and exports fell.
The Office for National Statistics reported that GDP grew by 0.7%, in line with last month’s initial estimates. That confirmed that the UK has now grown for the last seven quarters:
UK GDP, Q3 2014 Photograph: ONS
But new details of expenditure in the economy worried several experts.
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