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Eurozone members of the Group of 20 leading economies have committed to driving down borrowing costs across the single currency area, according to the communiqué from the summit in Mexico. On the day that Spain was forced to pay more than 5 per cent to borrow money for one year, the need for action to stem the spiral of rising government bond yields was accepted on Tuesday by Germany, France and Italy, the G20’s three eurozone members. http://www.ft.com/intl/cms/s/0/44c211c0-ba34-11e1-84dc-00144feabdc0.html#axzz1yIzGTwQi
Leading hedge fund managers are betting on a significant sell-off in German government bonds in the coming months after a sharp fall in yields on the debt paper driven by a flight to safety in the eurozone. More than 50 per cent of managers polled at an industry conference in Monaco on Tuesday said they expect Bund yields to double within a year. http://www.ft.com/intl/cms/s/0/fcde12c6-ba35-11e1-aa8d-00144feabdc0.html#axzz1yIzGTwQi
Faltering global growth has pushed UK inflation to its lowest since 2009, raising expectations that the Bank of England will restart quantitative easing to stimulate the economy. Falling commodity prices helped to lower the UK’s annual consumer prices index inflation rate from 3 per cent in April to 2.8 per cent in May as food price inflation slowed and fuel prices dropped.http://www.ft.com/intl/cms/s/0/6d0d7e3a-b9ee-11e1-aa8d-00144feabdc0.html#axzz1yIzGTwQi
Blink and you’ll miss it. As this month’s brief rallies in the wake of Spain’s bank bailout news and Sunday’s Greek elections show, wait too long to tap public bond markets and you might miss your opportunity altogether. Six months after the European Central Bank first offered hundreds of banks across the eurozone access to cheap loans, and with the Europe’s debt crisis far from resolved, bank funding markets are dysfunctional. According to Dealogic, European banks have issued just $40bn of senior unsecured debt since the start of April, well below the same period in previous years. Covered bond issuance for the quarter so far stands at just $27bn. http://www.ft.com/intl/cms/s/0/30221076-b921-11e1-9bfd-00144feabdc0.html?ftcamp=published_links%2Frss%2Fmarkets%2Ffeed%2F%2Fproduct#axzz1yIzGTwQi
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France is pressing the EU to adopt a financial stability package to stem the eurozone crisis, believing negative market reaction to the €100bn bailout of Spain’s banks shows the need for more comprehensive action. Ahead of the EU summit due on June 28, Paris is set to propose a package of measures to put the European Central Bank in charge of bank supervision and to use the European Stability Mechanism, the new €500bn eurozone rescue fund due to come into force next month, to recapitalise banks directly. http://www.ft.com/intl/cms/s/0/a732fdbe-b553-11e1-ad93-00144feabdc0.html#axzz1xe4lV9a0
Bankers’ bonuses across the European Union are set to be limited by law, with many bank lobbyists admitting in private that they have lost the fight against a European Parliament initiative to limit the size of bonuses relative to salary. Some banks still hope to increase the proposed ratio from 1:1 to 2:1 or beyond, while others are trying to limit the restriction to upfront cash bonuses, excluding deferred payouts. But many bankers now accept the principle of a ratio as inevitable. http://www.ft.com/intl/cms/s/0/9b023d40-b57e-11e1-b8d0-00144feabdc0.html#axzz1xe4lV9a0
Moscow forcefully rejected on Wednesday Hillary Clinton’s accusation that Russia was supplying Syria with helicopter gunships that could be used against civilians, as Syria announced it had “cleansed” the rebel town of Haffa of armed fighters. Speaking in Tehran, Sergei Lavrov, Russia’s foreign minister, said Moscow was instead “completing contracts that were signed and paid for a long time ago. All of them are contracts for what are solely air defence systems.” http://www.ft.com/intl/cms/s/0/5f277e60-b561-11e1-ad93-00144feabdc0.html#axzz1xe4lV9a0
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European officials are weighing up a bailout programme for Spain that would aid its fragile domestic banking sector while imposing only “very limited conditionality” on Madrid, a concession that could make a reluctant Spanish government more willing to accept international assistance. Unlike earlier bailouts for Greece, Portugal and Ireland, the proposed Spanish rescue would require few austerity measures beyond reforms already agreed with the EU and could even dispense with the close monitoring by international lenders that has proved contentious in Athens and Dublin, according to people familiar with the plans. http://www.ft.com/intl/cms/s/0/81e1c8ec-afe5-11e1-ad0b-00144feabdc0.html#axzz1x51pZngY
The pattern is now all too familiar and has been a regular feature since the financial crisis. Fears of systemic stress and weak US economic data spark dramatic declines in Treasury yields, followed by the Federal Reserve launching a new round of bond purchases, confirming the pre-emptive positioning of bond investors. Against the backdrop of the eurozone crisis and a poor US jobs report for May, the big drop in Treasury yields and record low mortgage bond rates suggest this pattern may repeat itself and that a third round of quantitative easing, or QE3, looms when the Fed meets later this month.http://www.ft.com/intl/cms/s/0/5a158b8a-af1a-11e1-a8a7-00144feabdc0.html#axzz1x51pZngY
The US Federal Reserve is set to propose new capital rules on Thursday, including a provision that will reverse a policy that has helped shield US bank capital levels from volatility, people familiar with the matter said. US banking industry groups and lenders, including Citigroup and Wells Fargo, have been trying to persuade lawmakers that the measure, which is among a batch of proposals to implement the Basel III accords, will hurt them relative to overseas competitors. They also say that they may have to curtail purchases of long-term US Treasuries and municipal debt.http://www.ft.com/intl/cms/s/0/738bc31a-b026-11e1-ad0b-00144feabdc0.html#axzz1x51pZngY
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Mariano Rajoy, Spain’s prime minister, has called for centralised control of national budgets in the eurozone in an unexpected gesture to mollify Brussels and Berlin on the eve of what is expected to be a crucial week for Madrid. Spain’s Treasury plans to auction sovereign bonds on Thursday, even though analysts say the country may soon need an international bailout and yields on its debt have risen close to the 7 per cent level that heralded previous rescues for Greece, Ireland and Portugal. http://www.ft.com/intl/cms/s/0/2975c03c-ada1-11e1-97f3-00144feabdc0.html#axzz1wnSfNRli
Central banks in emerging markets have been dumping euros to shore up their own currencies, contributing to the euro’s drastic slide in recent weeks, according to traders. The euro lost nearly 7 per cent against the US dollar in May – its biggest monthly fall since September – as fears over a Greek exit from the single currency grew and investors sold the government debt of peripheral European nations. Currency traders said central banks were among the biggest sellers of the euro – reversing their normal pattern of buying the single currency when it weakens to diversify their stockpiles of foreign exchange reserves. http://www.ft.com/intl/cms/s/0/8a6114a8-ad76-11e1-97f3-00144feabdc0.html#axzz1wnSfNRli
The group of billionaire oligarchs who are BP’s partners in TNK-BP have threatened to thwart any attempt by the UK oil group to sell its stake in the joint venture, creating fresh risks for chief executive Bob Dudley as he moves to execute one of the biggest divestments in the UK energy group’s history. The partners, known as AAR, say their shareholder agreement prevents BP giving out any confidential information about TNK-BP to any third party without AAR’s consent – including details of the shareholder agreement itself. http://www.ft.com/intl/cms/s/0/f631ab24-ad8b-11e1-bb8e-00144feabdc0.html#axzz1wnSfNRli
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An important gauge of China’s manufacturing sector has weakened sharply, adding to the pressure on the government to take more decisive action to support the flagging economy. The official purchasing managers’ index for manufacturing fell to 50.4 in May, its lowest in five months, from 53.3 in April. Although it was the Chinese PMI’s sixth straight month above the 50 level, which signals an expansion of activity, the fall in the index highlighted a clear softening of growth momentum. High quality global journalism requires investment. As the first item of official economic data for May, the PMI offers a timely glimpse into how the Chinese economy performed over the past month. Many analysts and officials had believed that China was on track for a “soft landing” until a raft of poor data in April led to a flurry of growth forecast downgrades. http://www.ft.com/intl/cms/s/0/d2f17014-ab87-11e1-b675-00144feabdc0.html#axzz1wQ4tZnA1
The dramatic drop in Indian economic growth isn’t bothering the likes of Mahendra Saraf. A farmer, he works in a sector that has seen growth shrink to 1.7 per cent in the first three months of 2012 against 7.5 per cent in the same period last year. But Mr Saraf, 26, is confident the blow to his profits will be cushioned by government agricultural subsidies. “Global and domestic demand was not been very strong,” he says, “but the government buys excess grain at a fixed price, so we will get that money anyway.” High quality global journalism requires investment. Such safety blankets – the size of which vary from state to state and industry to industry – are among the targets of those who say the government of Manmohan Singh needs to take radical measures to restore growth in the Indian economy. With growth in the first quarter of 2012 rising at 5.3 per cent, the slowest rate in nine years, policy makers are panicking about how to turn things around. “It’s an absolute disaster,” says Omkar Goswami, head of the Corporate and Economic Research Group in New Delhi. “We went from nearly growing at 10 per cent to 5 per cent in less than two years . . . it’s very, very concerning.”http://www.ft.com/intl/cms/s/0/d9928116-ab13-11e1-b875-00144feabdc0.html#axzz1wQ4tZnA1
Madrid was dealt a double blow on Thursday after it emerged that almost €100bn in capital had left the country in the first three months of the year and the head of the European Central Bank lambasted its handling of Bankia, the troubled Spanish lender. Data published by Spain’s central bank showed €97bn had been pulled out in the first quarter – around a 10th of the country’s GDP – as concerns mounted over Madrid’s ability to contain its twin economic and financial crises, which have forced government borrowing costs to euro-era highs. http://www.ft.com/intl/cms/s/0/25c39204-ab01-11e1-b875-00144feabdc0.html#axzz1wQ4tZnA1
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The technocratic government of Mario Monti has made significant progress towards overhauling Italy’s economy since it came to office last year, but has not done enough to combat tax evasion and the country’s sizeable black economy, an EU finding to be released this week has determined. The European Commission report, which is still in draft form and was obtained by the Financial Times before its publication on Wednesday, carries significant weight under new EU rules that give Brussels the right to fine and sanction eurozone countries that do not follow its recommendations.http://www.ft.com/intl/cms/s/0/960e4250-a7f2-11e1-b8a9-00144feabdc0.html#axzz1w8XyzKzt
In a country where wealth matters more than most – if only because of its extreme shortage – being a teacher once meant making a decent living. However, as salaries for corporates ector jobs have soared and those for professors have stagnated, the respect afforded to academics – and the subsequent desire of students to become them – seems to have done the same. A government panel said recently that India’s shortage of faculty staff could be “significantly higher” than the 40 per cent widely estimated. While the prestigious Indian Institutes of Management and Indian Institutes of Technology – which cater to less than 40,000 of India’s roughly 16m college students – are largely immune to the overall shortage, even they have come under fire for lacking top-quality professors.http://www.ft.com/intl/cms/s/2/6e5725ee-7cd0-11e1-9d8f-00144feab49a.html#axzz1w8XyzKzt
Newedge, a leading broker, is abandoning the Greek stock market in a sign of mounting concern over the country’s future in the eurozone. The broker has told clients that it will process only sell orders, and stop extending margin loans for existing positions in Greek securities, according to a memo obtained by the Financial Times. A list of securities subject to the new restrictions include foreign-listed shares and American depositary receipts for Greek companies including Alpha Bank, Coca-Cola Hellenic Bottling and Paragon Shipping, a New York-listed shipowner that is headquartered in Greece. http://www.ft.com/intl/cms/s/0/a2123114-a690-11e1-aef2-00144feabdc0.html#axzz1w8XyzKzt
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JPMorgan Chase’s shareholders suffered a further blow on Monday when the bank suspended its $15bn share buy back programme to preserve capital following the $2bn trading loss. With the embattled bank’s shares falling another 2 per cent on the news, investors have seen $30bn wiped off the bank’s market value since the losses in its chief investment office were revealed 10 days ago. http://www.ft.com/intl/cms/s/0/4c678268-a349-11e1-ab98-00144feabdc0.html?ftcamp=published_links%2Frss%2Fhome_asia%2Ffeed%2F%2Fproduct#axzz1vTdMAajU
Facebook shares fell on Monday below the price at which they floated, inflaming a debate about who was to blame for the stock’s failure to “pop” after the social network’s keenly watched initial public offering. Some investors accused Facebook of taking advantage of enormous demand to sell at an inflated price, while other market participants pointed to a glitch in Nasdaq OMX’s IPO software as the reason that potential buyers fled. http://www.ft.com/intl/cms/s/0/9b7a360c-a33f-11e1-8f34-00144feabdc0.html#axzz1vTdMAajU
Europe’s top antitrust enforcer on Monday delivered an ultimatum to Google to put its house in order or risk hefty fines, in the most significant transatlantic competition spat since Brussels waged its legal war with Microsoft a decade ago. The US search giant now has “a matter of weeks” to make a decision on whether to change its business voluntarily to address serious competition concerns even though it says they are unjustified. http://www.ft.com/intl/cms/s/0/564a284a-a334-11e1-8f34-00144feabdc0.html#axzz1vTdMAajU
France is determined to push the idea of jointly guaranteed bonds as a new form of borrowing for eurozone countries despite Germany’s opposition, Pierre Moscovici, finance minister, said in Berlin on Monday. Speaking after a first intensive meeting with Wolfgang Schäuble, his German counterpart, Mr Moscovici confirmed that François Hollande, the newly elected French president, would include the concept as part of a package of growth measures to be debated by European leaders at an informal summit on Wednesday. http://www.ft.com/intl/cms/s/0/f9876df6-a366-11e1-988e-00144feabdc0.html#axzz1vTdMAajU
Banks are braced for a fresh attack on their profit margins, if Moody’s presses ahead shortly with plans to downgrade short-term funding ratings sectorwide. Investors see UK lenders, in particular Lloyds Banking Group and Royal Bank of Scotland, as most exposed to the risk of rating downgrades in coming weeks, with a combined £110bn of funding in short-term money markets.http://www.ft.com/intl/cms/s/0/d182b7b4-a368-11e1-ab98-00144feabdc0.html#axzz1vTdMAajU
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JPMorgan Chase is investigating whether London-based traders hid the extent of losses on credit derivatives positions, according to people familiar with an internal probe following last week’s revelation of $2bn losses. The investigation comes as Jamie Dimon, chief executive, took to US television to say he was “dead wrong” to have dismissed questions over the risk-taking of his chief investment office. The futures of the trading unit – a subset of the CIO that incurred the losses – and people who work there are under question, with departures possible in the next 24 hours, people familiar with the matter said.http://www.ft.com/intl/cms/s/0/adc55f24-9d06-11e1-9327-00144feabdc0.html?ftcamp=published_links%2Frss%2Fhome_uk%2Ffeed%2F%2Fproduct#axzz1uofkmjQk
Eurozone central bankers have talked publicly for the first time of managing a possible Greek exit from Europe’s monetary union as stalemate in Athens talks on a coalition government raises the prospect that Greece will renege on the terms of its international bailout. The comments by members of the European Central Bank’s governing council indicate that the risk of eurozone fragmentation is being taken increasingly seriously by the region’s policymakers. http://www.ft.com/intl/cms/s/0/680d8532-9d11-11e1-9327-00144feabdc0.html#axzz1uofkmjQk
Angela Merkel’s centre-right Christian Democratic Union suffered a bruising defeat on Sunday night in the election of a new parliament in North Rhine-Westphalia, Germany’s most populous state, when the centre-left opposition of Social Democrats and Greens won a clear majority. The vote for the CDU slumped to just 26 per cent, according to the first exit polls, by far its worst result in the state in the post-war period, and a serious setback for the German chancellor. http://www.ft.com/intl/cms/s/0/8edb6b32-9d18-11e1-9327-00144feabdc0.html#axzz1uofkmjQk
All you need to read and some more below.
News That Matters
All you need to read and some more below.
News That Matters
All you need to read and much more.
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