Markets lifted by oil and Italian banks despite growth fears - as it happened

Graeme Wearden and Nick Fletcher (from 9.15)

from on 2016-04-11 16:32 (#1A2KJ)

5.32pm BST

European markets have started the week on a positive note, lifted by rising oil prices and a positive performance from banking shares.

Hopes of a positive outcome from the Doha meeting of oil producers this month lifted Brent crude by more than 2% to $42.86 a barrel, benefiting commodity companies. Meanwhile Italian banks gained ground, with investors optimistic about a plan to set up a fund to take over bad loans, which pulled the whole sector higher.

4.18pm BST

Italian banks continue to move higher on hope that a state-backed fund to buy bad loans will soon be set up.

Troubled Monte dei Paschi is up around 9% while Unicredit and Intesa Sanpaolo, the country's two biggest banks, are both up around 2%. Jasper Lawler, market analyst at CMC Markets, said:

A meeting of Italian banks, the Bank of Italy and government agencies ahead of the creation of a rescue fund lifted banking shares across Europe. If the fund can bring in outside investors as stakeholders and even issue its own bonds then it's chances of success will be greater than the kind of government bailouts that have failed to turn things around so far.

3.47pm BST

Speaking of helicopter money, Reuters is reporting that the European Central Bank is attempting to soothe ruffled feathers - particularly in Germany - after it suggested last month that the idea of giving money directly to citizens was an interesting idea:

Almost a month after stoking a divisive debate about how far it should go in pumping money into the flagging euro zone economy, the European Central Bank is trying to soothe relations with Germany after unusually strong criticism from Berlin.

Late last week, German Finance Minister Wolfgang Schaeuble was reported as blaming the ECB's cheap-money policy in part for the rise of the country's right-wing anti-immigration Alternative for Germany (AfD).

Late last week, top ECB officials, including the ECB's chief economist and its vice president, backpedalled, saying the idea was not on the table. But the damage had already been done.

"The ECB's policy was already unpopular in Germany and the idea of helicopter money was the straw that broke the camel's back," said Joerg Kraemer, an economist with Commerzbank in Frankfurt. "People feel that ideas like this are dangerous."

3.25pm BST

So-called helicopter money - involving central banks printing money and giving it directly to consumers in an effort to boost spending and growth - should not be ruled out entirely according to former Federal Reserve chair Ben Bernanke.

In a new post he says the probability of helicopter money being used in the US in the foreseeable future is low. But it could prove a valuable tool for central banks although it poses problems with implementation. He concludes:

Money-financed fiscal programs (MFFPs), known colloquially as helicopter drops, are very unlikely to be needed in the United States in the foreseeable future. They also present a number of practical challenges of implementation, including integrating them into operational monetary frameworks and assuring appropriate governance and coordination between the legislature and the central bank.

However, under certain extreme circumstances-sharply deficient aggregate demand, exhausted monetary policy, and unwillingness of the legislature to use debt-financed fiscal policies-such programs may be the best available alternative. It would be premature to rule them out.

2.44pm BST

Ahead of the latest US reporting season which begins - as always - with Alcoa, Wall Street has moved ahead in early trading.

With oil prices maintaining their recent gains - Brent crude is currently up just over 1% at $42.41 a barrel - the Dow Jones Industrial Average is is up around 90 points or 0.5%.

2.25pm BST

And more from our correspondent in Athens on the anti-austerity pact signed signed between the Greek prime minister Alexis Tsipras and visiting Portuguese leader Antonio Costa. Helena Smith reports:

True to form, Tsipras has used the occasion of his Portuguese counterpart's visit to lob a few verbal volleys at international creditors keeping debt-stricken Greece afloat.

As the accord was made public, the leftist leader announced that it was the right of every "sovereign and democratic country" to elect the means by which it would meet agreed (fiscal) targets.

Athens is in a race against-the-clock to conclude negotiations with auditors representing lenders at the EU and International Monetary Fund before talks break off for the latter's annual Spring meetings which begin in Washington DC tomorrow. "They have to be wrapped up by tomorrow," said the Greek economy minister Giorgos Stathakis.

Greece has long laid the blame for the failure to complete what would be the first review of its third international bailout at the door of the IMF. Every day that the economic progress report is delayed, the real economy - already in tatters - suffers a little more with the country effectively being put on hold until it receives its next aid disbursement from creditors.

2.16pm BST

Athens Live has documents from the bailout talks between Greece and its creditors suggesting the two sides are heading towards a conclusion:

"IMF and EU Leak Drafts of the Greek Bailout Agreement" by @AthensLiveGr https://t.co/IHu29Egt6F

2.09pm BST

Back with the sale of Tata's Scunthorpe plant to Greybull, the trade association for the UK steel industry welcomed the deal but said more needed to be done to support the rest of the sector. Gareth Stace, director of UK Steel, said:

This is clearly good news for the British steel sector, and I hope it will provide a much needed boost for steelmaking in the UK. However, while very welcome it does not mean that we are out of the woods yet. A long term investor is needed, in the very short term, for the remainder of the whole of the Tata Steel UK business, including Port Talbot. We must also remember that the crisis that we are in is not confined to just the Tata Steel businesses, but the sector as a whole.

In order to help make the Long Products Europe business a success, as well as the steel companies across the UK, we still need government to pull all levers, push all buttons and take every action possible to ensure British steel can once again complete on the global market place. This includes pushing the European Commission to continue its steel dumping investigations ensuring that tariffs are set at an appropriate level.

1.47pm BST

All very friendly as Portugal's prime minister Antonio Costa shakes hands with Greece's Alexis Tsipras on a visit to Athens.

12.30pm BST

Back with the Greybull deal to buy Tata's Scunthorpe operations, and the Unite union has called for the government to act to allow the business to operate on a level playing field with competitors.

Unite convenor for Tata Steel Scunthorpe Martin Foster said:

This announcement is good news and brings us within touching distance of securing a future for steelmaking in Scunthorpe.

It should not be forgotten though that many workers have already lost their jobs at Scunthorpe and those that remain are making huge sacrifices with their pay and pensions to secure their jobs.

12.27pm BST

Greek prime minister Alexis Tsipras has just signed an anti-austerity pact with visiting Portuguese leader Antonio Costa:

Joint declaration of the Pr. Ministers of Greece and Portugal against austerity for a progressive democratic Europe. https://t.co/euhbSdnqqT

12.22pm BST

The Economist Intelligence Unit is casting some doubts on plans to restructure Italy's banking system:

#Italy arranging industry funded bank bailout as fears grow. But without significant Gov support, which #EU won't allow, hard to pull off

12.11pm BST

German finance minister Wolfgang Schiuble and European Central Bank president Mario Draghi will talk this week in Washington at the IMF meeting.

That is according to a spokesman for the German finance ministry. It should be an interesting talk after Schiuble's comments criticising the ECB's loose monetary policy.

11.59am BST

The British Steel name will be revived following confirmation that Tata has sold its UK long products business to investment group Greybull.

The move should safeguard 4,400 jobs, and included a steelworks in Scunthorpe, two mills in Teesside, an engineering workshop in Workington, a design consultancy in York, and associated distribution facilities, as well as a mill in northern France.

The return of "British Steel". Greybull to buy Scunthorpe steel plant from Tata and rebadge it as British Steel pic.twitter.com/lSz4loyNjA

11.33am BST

The European Commission is also talking of "progress" in the talks between Greece and its lenders. A Commission spokeswoman said (quote from Reuters):

Progress has been made over the weekend. Talks are continuing in Athens today. Our aim remains to conclude the review as soon as possible.

11.29am BST

Germany's economy has picked up speed in the first few months of the year, according to the country's economy ministry.

Domestic demand has been the driver with overseas trade struggling.

#IHS forecast Q1 GDP growth at 0.6% q/q. #German economy gained pace at start of year; economy ministry https://t.co/6EJckCSyzm via @Reuters

10.45am BST

More fuel to the row over pay at BP:

The controversy over the $20m (14m) pay for BP's chief executive has intensified after a group representing individual shareholders urged members to vote against the measure at this week's annual general meeting (AGM).

ShareSoc said Bob Dudley's pay was too high for a company that suffered a record loss last year and has under performed rivals for a long time. It also reflects a convoluted incentive scheme that should be simplified, it said.

10.40am BST

The International Monetary Fund and the other members of the troika - the EU and ECB - underestimated the impact of some of the measures it recommended for Greece, the IMF managing director Christine Lagarde has admitted.

In a wide ranging interview with Bloomberg ahead of the fund's meeting this week, Lagarde said:

We have acknowledged one mistake, which had to do with the fiscal multipliers where we-all of us, the IMF, Europeans, the ECB [European Central Bank]-underestimated the contracting impact of some of the measures that we recommended. We overestimated the ability of Greece to actually endorse and take ownership of measures that were needed, because we moved from one government to another to another to another, and it was always, "It's not really our program, it's not really our reforms, it's not really our measures. It's imposed by the Troika putting all members in the same bag." So I think that was overestimated.

Greece cannot just continuously tag along and expect that things will be sorted out. The Greek leaders will need to take more ownership of reestablishing their country.

Yes, I think so. We're not out of the Greek situation yet. And I think the present circumstances with the migration and the refugees are going to strengthen the critical role Greece is playing in the EU.

10.13am BST

Here's Reuters on the continuing talks between Greece and its creditors:

Greece and its international lenders were edging closer to a compromise on signing off on a review of bailout reforms which could unlock more aid to the country, government sources said on Monday, after marathon talks with creditors.

Just over ten hours of overnight negotiations between Athens and its lenders - the European Commission, the European Central Bank, European Stability Mechanism and the International Monetary Fund - broke off shortly before 0400 GMT. They were scheduled to resume later Monday.

9.59am BST

European markets have clawed back early losses and are now trading in positive territory.

The turnaround is partly due to a rise in the Italian banking sector. European banks have come under pressure on concerns about the damage that negative interest rates will have on their stretched balance sheets. Italy's financial sector is seen as particularly vulnerable, but there are hopes that the country's government can reach an agreement on a state-backed fund to buy bad loans and underpin the sector.

9.36am BST

Over in Greece, and some progress appears to have been made in the talks between the government and representatives of its creditors.

According to the Athens-Macedonian news agency, economy minister George Stathakis said the two sides have agreed on tax issues but need further talks on bad loans: "Progress has been made in order to have an agreement on bad loans, but the issue has not closed yet... We are very close [to an agreement on bad loans]."

9.26am BST

More on the yen's rise. Jasper Lawler, market analyst at CMC Markets UK, said:

The speed of the ascent in the Japanese yen will put markets on high alert for intervention from the Bank of Japan this week. Markets are calling the bluff of the Bank of Japan. The yen closed higher on Friday in a direct challenge to Japanese officials who had earlier in the day verbally intervened. With dollar/yen at 108, relatively strong by recent historical standards, the Bank of Japan faces a strong risk of failure by jumping the gun. Unless there is a sudden drop below 105 in the early part of the week, the BOJ will likely hold back on directly selling yen in the market.

9.01am BST

Conner Campbell of SpreadEx sums up the situation this morning:

Following last Friday's rebound the markets appear to have started Monday back in a bad mood.

An unexpected fall in Chinese inflation, a rapidly growing yen and fears of a gloomy statement from the IMF on Tuesday are weighing on sentiment.

8.52am BST

Germany's finance minister, Wolfgang Schiuble, has caused plenty of chatter this morning after announcing that central banks should tighten monetary policy.

I just said to [US Treasury secretary] Jack Lew that you should encourage the Federal Reserve and we should encourage the European Central Bank and the Bank of England in a concerted action, to carefully but slowly exit."

"I said to Mario Draghi"be very proud: you can attribute 50% of the results of a party that seems to be new and successful in Germany to the design of this [monetary] policy."

Expropriation of the saver in one chart. Acc to DZ Bank, German savers have lost a343bn b/c of low interest rates. pic.twitter.com/c8RTKaCYGU

8.40am BST

Overnight, China's inflation rate came in lower than expected.

Consumer prices across China rose by 2.3% annually in March, compared to expectations of a 2.5% rise. That's another sign that demand in the Chinese economy is losing momentum.

For an extended period, data from Beijing has repeatedly followed a negative path and this could be the continuing theme as the nation continues to transition away from its manufacturing roots towards the service sector.

8.28am BST

Shares are dropping across Europe in early trading, as traders anticipate growth downgrades from the IMF tomorrow.

Britain's blue-chip FTSE 100 index is down 38 points or 0.6%, and it's a similar picture in other markets:

8.18am BST

Money is pouring into German government debt this morning.

This has pushed the interest rate (or yield) on 10-year bunds to a one-year low of just 0.08% (meaning prices are at a one-year high).

*GERMANY 10-YEAR BUND YIELD HITS LOWEST SINCE APR 2015

*GERMANY 2-YEAR YIELD REACHES LOWEST SINCE ECB MARCH 10 MEETING

8.14am BST

French bank BNP Paribas expect the International Monetary Fund to cut its forecasts tomorrow.

But they also hope to hear some soothing comments from policymakers:

The IMF Spring meetings begin this week, whilst the World Economic Outlook (published on Tuesday) will likely downgrade global growth forecasts.

Nonetheless, we still expect comments from the meetings to be supportive of global markets.

8.11am BST

Gold has hit a three-week high this morning, thanks to worries over the global economy and the weakening dollar.

"Markets are still jittery about what's going on in the global economy... and gold is the preferred safe-haven."

8.04am BST

Policymakers in Japan may be getting jittery today, as they watched the yen hit a 17-month high against the US dollar.

The American currency fell to just 107.63 yen to the $1, the weakest level since autumn 2014. That extends last week's 3.3% fall.

#Japan's Nikkei closes down 0.4% at 15751.13 as Yen continues to strengthen. Hits fresh high at 107.63 this morning. pic.twitter.com/Ffw4y5KUeh

7.48am BST

The World Bank has added to concerns over the China's economy, by trimming its growth forecasts for East Asia.

It believes that the region's GDP will rise by 6.3% in 2016, down from 6.4% in its last forecasts in October.

"The fundamentally positive base case for growth and poverty reduction in the region is subject to elevated risks."

"In particular, vulnerabilities created by the interplay between high levels of indebtedness, price deflation, and slowing growth in China bear close monitoring, as do corporate and financial sector vulnerabilities across much of the region."

7.33am BST

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

The IMF's latest update is expected to reprise warnings about risks from a slowdown in emerging market economies, China's downturn and lower commodity prices. It cut its outlook in January and recent downbeat comments from its managing director, Christine Lagarde, were taken by many as a hint that more cuts are to come in Tuesday's World Economic Outlook.

Lagarde said in a speech that the global economy had lost momentum and that "the recovery remains too slow, too fragile, and risks to its durability are increasing." She also called on governments to pursue more growth-friendly policies.

European markets opening calls#FTSE -20#DAX -25#CAC -15

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