Euro and Greek bonds hit by bailout fears

All the latest economic and financial news, as speculation swirls that Greece could fail to meet its IMF repayments in June

• Latest: Eurozone official says no deal by Thursday
• Summary: Euro drops as Greek fears swirl
• Greek bond weaken after Varoufakis blames creditors
• Spanish bonds drop after regional election

6.25pm BST

As the Greek talks grind on and time runs out for a deal before a default, European markets ended the day on a downbeat note. Some were closed on Monday, and took the opportunity to catch up with a slump in the Athens market on that day, while in contrast Greek shares actually recovered some ground. Gains by Spanish anti-austerity parties in regional elections also added to the mood of uncertainty surrounding the eurozone.

Meanwhile a stronger dollar on talk of a US interest rate rise later this year, reinforced by some strong economic numbers, also hit sentiment. The final scores showed:

6.17pm BST

Earlier, European commission president Jean-Claude Juncker reportedly said Greek finance minister Yanis Varoufakis had become a hindrance to the attempts to broker a deal. Over in Athens the media is making much of this, as Helena Smith reports:

The banner headline in Ta Nea this evening says it all: "Junker 'Varoufakis is not helping the negotiations.'"

"He is not helping the process. Mr Varoufakis is the finance minister of a country that has to confront huge problems and he doesn't give the feeling that he knows that." These comments from the EC president to the MNI news agency have caused a stir with every major news outlet leading on Jean Claude Junker's indictment of the Greek finance minister.

5.45pm BST

Greek two year bonds have continued to come under pressure, with the yield rising from 23.09% on Monday to 25.5%.

5.09pm BST

After all the confusion, this may be the upshot of the various meetings:

#Greece & their lenders to begin a teleconference today & are to discuss a potential deal in a meeting tomorrow in Brussels (@RANsquawk)

4.48pm BST

The US is likely to press Europe to reach a deal on Greece, when G7 finance ministers meet in Germany on Thursday and Friday this week, Reuters reports.

Greece is not formally on the agenda, but is likely to be discussed on the sidelines of the gathering (a familiar pattern). An official told Reuters:

I would expect the Americans to put pressure on the Europeans in Dresden about Greece. The Americans are stressing the geopolitical risks and telling us we have to find a solution, that we cannot really put the euro area and Europe at risk because of Greece.

If Greece for some reason were to turn to Russia and Moscow would get involved more, they could get too much influence inside NATO and inside the EU when it comes to policies towards Russia.

3.13pm BST

More US data, with consumer confidence and new home sales both beating expectations.

According to Conference Board figures, the May consumer confidence index came in at 95.4, up from a revised 94.3 in April and better than the expected 94.9.

3.02pm BST

European commission president Jean-Claude Juncker for one reckons there is a growing belief that a Greek default can be avoided. Juncker told the MNI news agency:

My impression after talking to a series of colleagues is that the feeling is growing that a default should be avoided.

On the other hand all those I've spoken to are insisting on the involvement of the (International Monetary Fund). No deal without the agreement of the IMF.

2.49pm BST

Back in the US, and new figures show that service sector growth slowed for the third month in a row in May.

The Markit preliminary purchasing managers index for services came in at 56.4, down from 57.4 in April . The composite index - an average of manufacturing and services - fell to 56.1 from 57 in April. Markit chief economist Chris Williamson said:

The rate of expansion remains below the buoyant rates seen throughout much of last year, as slower growth of service activity has been accompanied by a slowdown in the manufacturing sector, which has seen exporters hit by the stronger dollar.

2.37pm BST

Apparently it's now a teleconference this afternoon between Greece and its creditors.

Government Official: Greek creditors are to hold a teleconference today, meet tomorrow - BBG

2.31pm BST

And the sense of frustration is palpable:

Another day was wasted talking abt possible tax on withdrawals from ATMs. Still going around in circles after 4 months in office #Greece

Drafting & re-drafting is a great process to reach gd deal. Throwing weird (non-reforming) proposals & retracting w/in 1 hour, not so much.

2.28pm BST

The idea of Greece consolidating all the payments due to the IMF in June into one lump sum could be risky unless a deal is done with its creditors. Here's the full Reuters' report on the idea:

Cash-strapped Greece could avoid paying back the IMF on June 5 and win more time to negotiate a funding deal without defaulting if it lumps together all IMF repayments due in June and pays them at the end of the month, officials said on Tuesday.

Greece has to repay the International Monetary Fund 300 million euros on June 5, the first of four instalments due in June that total 1.6 billion euros.

2.27pm BST

On the other hand... Efi Koutsokosta, Euronews's Brussels correspondent, reckons that negotiations between Greece are continuing.....

Technical contacts for #Greece taking place today as scheduled, #brusselsgroup tomorrow- Not cancelled according to EU Commission sources.

2.20pm BST

Now the Greek finance ministry is saying (according to Reuters) that a banking transaction tax and a levy on ATM withdrawals is "no longer" being discussed in talks with EU/IMF lenders. Not clear what that means if the talks have in fact been cancelled, however.

2.13pm BST

An unnamed eurozone official has warned that progress is still too low, and ruled out a deal by Thursday.

They also criticised the Athens side for not producing credible proposals for VAT reforms, which rather undermines the argument that a deal is close.

2.10pm BST

Enikos is also reporting that today's talks between Greece and creditors is off.

They say:

The scheduled meeting of the so-called Brussels Group on the Greek bailout has been cancelled.

A Greek senior official did not give a reason for the cancellation of the meeting that was due to be held on Tuesday afternoon.

#Brussels Group meeting cancelled #Greece #bailout- BREAKING - http://t.co/VPVGb8mbYs pic.twitter.com/UMIB0cVBkX

2.06pm BST

Interesting..... talks between Greece and its creditors in Brussels have been 'postponed', according to Greek financial website Capital.gr

Today's #BrusselsGroup meeting is postponed. Oops... #Greece https://t.co/TncsLt7Q5I

2.02pm BST

Time for a quick recap.

Concerns that Greece might fail to meet the a1.6bn repayments due to the International Monetary Fund have hit Europe's financial markets today.

If we decide that there is no money left for the IMF, we have repeatedly said that our priority is to pay salaries, pensions, health, education".

Greek 2yr yields jump to almost 25% on more Greek noise. #ECB's Hansson says agreement on #Greece 'not in sight' yet. pic.twitter.com/83UPNUBC3Q

1.38pm BST

Finally, some economic data is hitting the wires, from America.

And the news is that durable goods orders, excluding the volatile aircraft orders, jumped by 1.0% in April. That's stronger than expected.

Really solid durable goods number. This is the kind of report we've been waiting awhile to see. http://t.co/hHgcY3iFmi

Major upward revisions to prior months. And solid beats on the core numbers.

1.29pm BST

The trial of Tom Hayes, the former UBS and Citigroup trader accused of manipulating the Libor rate, has begun at Southwark Crown Court in London.

A trader was motivated by greed as he acted as "ringmaster" in a "thoroughly dishonest and manipulative manner" to rig interbank lending rates, a court has heard.

Tom Hayes, 35, whose trial began on Tuesday, is alleged to have done "everything in his power" to manipulate the rates, known as Libor.

Related: Libor trial: trader driven by greed was 'ringmaster' in rate-rigging conspiracy, court hears

1.15pm BST

Mujtaba Rahman, analyst at Eurasia Group, reckons that Greece will probably reach a deal with the eurozone in time.

Despite the inflammatory talk of defying Greece's creditors, Rahman believes that a compromise will be hammered out; and that Alexis Tsipras will only suffer a handful of defections.

We continue to believe Tsipras will lose around 5-10 lawmakers from his coalition when the package is presented to parliament (potentially attached to a vote of confidence). But we suspect he will lose less than 12 MP's allowing him to keep his parliamentary majority.

Albeit ideological, Lafazanis is a team player who understands the government and party's needs need to come before those of the Left Platform, and importantly, believes Syriza can make a difference in government. He will therefore want to avoid creating the circumstances that could result in a National Unity government in which Syriza's influence would be heavily diluted.

While Lafazanis will not support any deal, concessions over the fiscal primary surplus, labour and pensions should be enough to keep him and his MP's in line. Moreover, Lafazanis has a lot of meddling power outside of parliament with the capacity to delay and water down implementation of reforms once they are legislated, as well as to challenge them in court. This affords him another less destructive avenue to express his disagreement with the deal rather than overthrowing the government.

12.38pm BST

#Varoufakis tells journos govt mulls imposing a small tax on cash withdrawals from ATMs to give incentive to use credit cards #Greece

12.32pm BST

Yanis Varoufakis has apparently also indicated today that Greek savers might incur a 'small' fee when they use a machine [he's been speaking to reporters in Athens].

#Greece FinMin Varoufakis says there may be 'a small' levy on bank withdrawals via ATMs.

12.19pm BST

Over in Athens the main opposition party has issued a withering attack on the government, saying that Greece is being ruled by a party where 40 percent want to take the country out of the euro.

"It has become clear that we are being governed by a party where 40% want us to leave the euro zone and to return to the drachma.

In the event that this is adopted we will live a huge national catastrophe and we will speak of the great national tragedy of the 21st century."

11.55am BST

Heads-up: Greek finance minister Yanis Varoufakis has apparently pledged that Greece will meet its a305m repayment to the International Monetary Fund:

11.27am BST

Optimism across Britain's retail industry has hit its highest level since 1988, according to the Confederation of British Industry this morning.

10.50am BST

European commissioner Pierre Moscovici hasn't changed his tune this morning.

Moscovici has just warned that there is no Plan B for Greece, and that more effort is needed to agree a reform plan.

10.43am BST

The crisis continues to bring out the best in Greece's street artists.

10.27am BST

An (unnamed) German government official has told Reuters that Berlin still hopes Greece will meet its IMF repayment next week:

10.09am BST

Another Greek government minister has floated the prospect of failing to repay the International Monetary Fund next month.

Deputy Minister of Social Insurance Dimitris Stratoulis told Mega TV this morning that pensions and wages must come first:

"If we decide that there is no money left for the IMF, we have repeatedly said that our priority is to pay salaries, pensions, health, education".

Failure to pay IMF is NOT a credit event, says Greek minister - http://t.co/wAhEvtIbM5

A: A missed payment date starts the clock ticking. Two weeks after the initial due date and a cable from Washington urging immediate payment, the fund sends another cable stressing the "seriousness of the failure to meet obligations" and again urges prompt settlement.

Two weeks after that, the managing director informs the Executive Board that an obligation is overdue. For Greece, that's when the serious consequences kick in. These are known as cross-default and cross-acceleration.

Important read from @nchrysoloras and @johneglover: FAQ on what happens if Greece doesn't pay the IMF http://t.co/bnyH4kqRF6

9.49am BST

Arnaud Masset, Market Analyst at online Swiss bank Swissquote also blamed Greece for the euro's weakness today:

In Europe, mounting uncertainty about Greece's next payment to the IMF on June 5 adds pressure on the single currency as Alexis Tsipras, Greece's PM, declared that his government would accept a sustainable deal "but not a humiliating" agreement, threatening to default on a1.6bn loan repayment due to the IMF in June.

As a result, the fall of the euro against the dollar accelerates.

9.39am BST

Kit Juckes, chief currency strategist at French bank Socii(C)ti(C) Gi(C)ni(C)rale, sums up the situation this morning:

The Greek government will need some form of deal in order to release further funds if it is to avoid missing payments to the IMF in June. Whether Greek PM Tsipras can negotiate a deal that is acceptable to enough MPs of his party isn't clear and markets are once again, very edgy.

Across the Mediterranean, there have been heavy losses by Spain's ruling Popular Party to anti-austerity parties in regional and local elections. Peripheral European government bond spreads are wider though not drastically, but the euro is much weaker.

9.33am BST

European stock markets are being buffeted by the Greek crisis, and the Spanish regional election results.

The main indices are all in the red this morning, led by Madrid.

9.22am BST

Greece's two-year bonds are now at their weakest level in a month:

Greek 2yr yields jump to almost 25% on more Greek noise. #ECB's Hansson says agreement on #Greece 'not in sight' yet. pic.twitter.com/83UPNUBC3Q

9.07am BST

Greek bonds are falling this morning, pushing yields (the rate of return on the debt) higher into the danger zone.

Some in the City are blaming Greek finance minister Yanis Varoufakis, who yesterday pointed the finger at Greece's creditors for the lack of progress.

The problem is simple: Greece's creditors insist on even greater austerity for this year and beyond - an approach that would impede recovery, obstruct growth, worsen the debt-deflationary cycle, and, in the end, erode Greeks' willingness and ability to see through the reform agenda that the country so desperately needs.

Our government cannot - and will not - accept a cure that has proven itself over five long years to be worse than the disease.

Fair-minded observers of the four-month-long negotiations between Greece and its creditors cannot avoid a simple conclusion: The major sticking point, the only deal-breaker, is the creditors' insistence on even more austerity, even at the expense of the reform agenda that our government is eager to pursue.

Greece 10 years up 46bp this morning to 11.83% - the mkt hated Varoufakis's article and the big split in SYRIZA adding to concerns.

8.42am BST

Traders are also blaming Klaus Regling, the head of the European Stability Mechanism, for today's euro selloff.

"There is little time left... That's why we're working day and night for an agreement.

Without an agreement with the creditors, Greece will not get any new loans. Then there's a threat of insolvency. There are a lot of risks contained in that,"

8.36am BST

Newsflash from Madrid; Spanish bank shares are falling, as last weekend's regional election results ripple through the markets.

At a local level, the PP faces a new era of coalition and compromise for which it is ill-prepared.

Rajoy - whose party must form pacts with some of the new groups if it is to retain power in a number of regions, including Madrid - has campaigned hard against them. Earlier this month he said they were "gangs" and a threat to Spain's political and economic stability.

8.30am BST

The euro is continuing to lose ground, and is now down 0.85 of a cent against the US dollar at $1.089.

It's not just about Greece, though. The dollar is romping ahead against most currencies this morning, on speculation that US interest rates will rise soon.

8.21am BST

Spanish government debt is falling in value too, after anti-austerity activists secured a stunning victory in last weekend's regional elections.

Related: Spain's indignados could rule Barcelona and Madrid after local election success

7.58am BST

The euro is losing ground against almost every major currency today:

EURUSD 1.0909. pic.twitter.com/cOTbJ5PYCh

7.57am BST

Fears over the Greek bailout have pushed the euro down to a one-month low this morning.

The single currency has fallen by over half a cent against the US dollar to $1.0909, its lowest point since late April.

"The Greek political saga will remain in the spotlight as the deadline for payments to the IMF approaches",

"A light data calendar and continued political uncertainty in Greece should continue to weigh on the euro."

Related: Greece warns it is set to default on debt repayment loans

"It would not be a catastrophe to exit the euro, (nor) a terrorist act not to pay the next instalment to the IMF."

7.46am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Amid mounting fears of financial collapse, Tsipras instructed officials to act speedily as his government sought to defuse tensions saying it would do its best to honour its debts - even if it failed to reveal how, exactly, it would find the money to pay a1.6bn in loans to the International Monetary Fund next month.

"We are very close to a deal," the finance minister Yanis Varoufakis told reporters. "There are many different Germans, just as there are many different Greeks," he said responding to reports that Berlin would not be prepared to retreat in what has become an all-out tug of war between the two governments.

Related: Greek PM convenes emergency meeting of his bailout negotiation team

Our European opening calls: $FTSE 7037 up 5 $DAX 11782 down 33 $CAC 5101 down 16 $IBEX 11259 down 64 $MIB 23269 down 17

Related: First Libor defendant faces trial in London