Christine Lagarde under investigation in fraud case; German consumer confidence hit by geopolitical fears - business live
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Version 0 of 1. 5.21pm BST17:21 European markets end on a mixed note After recent gains, stock markets were a little more hesistant, not helped by underwhelming share volumes again thanks to the continuing summer lull. After struggling for direction the UK market finally finished slightly higher (details here) but with uncertainty over whether the ECB was about to introduce further stimulus measures next week to boost the eurozone economy, other markets were more mixed. The final scores showed: On Wall Street, the Dow Jones Industrial Average is currently up nearly 12 points or 0.07% while the S&P 500 is holding fairly steady above the 2000 level. On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back again tomorrow. 5.08pm BST17:08 French jobless total rises to new record In the wake of the weekend’s collapse of the French government amid a rift over austerity measures, and the formation of a new cabinet on Monday, comes more evidence of the pain felt by the country’s economy. The number of people out of work in France rose to another record in July, up by 26,100 or 0.8% over the month to 3,424,400. The yearly rise was 4.3%. 4.18pm BST16:18 Over in Greece prime minister Antonis Samaras is about to hold talks with senior government ministers in a bid to fine-tune strategy ahead of the relaunch of negotiations with troika mission chiefs in Paris next week. From Athens, our correspondent Helena Smith reports: It’s back to business as usual with the Greek government hunkering down in preparation of next week’s crucial talks with mission heads representing [lenders] the EU, ECB and IMF in Paris. Samaras will meet his deputy, the socialist leader Evangelos Venizelos and other senior government ministers for what coalition leaders hope will be a final session of ‘strategising’ ahead of the new round of talks next Tuesday. The stakes are high and the trade-offs potentially enormous. “We want everything to go smoothly which, as you know, is why this time the talks will take place in a neutral setting,” said one government insider referring to the decision to relaunch negotiations in the French capital. “We’re fine-tuning details.” The Greek government has made no secret of the fact that it hopes creditors will finally embark on serious discussions to scale back the country’s monumental debt load – at nearly 175% of Gross National Product by far the largest in the EU – once the current review of the economy is over. But much will depend on whether lenders are convinced of the progress Athens has made in plugging fiscal holes and enforcing structural reforms. Greece has yet to lay off 6,500 civil servants – essential, troika officials say, to streamlining a public sector widely seen as the root of so many of the country’s financial woes. The Greek finance minister Gikas Hardouvelis has been cited in the local media as saying he hopes the troika “will feel sorry” for Greece after eating so much austerity pie – the Greek economy had contracted by more than 25%, with most seeing their disposable incomes drop precipitously since the eruption of the debt crisis in late 2009. Foreign lenders have not ruled out Greece needing a third bailout – something the government is keen to avoid. Samaras is believed to have said as much when he held talks with the former finance minister of France Pierre Moscovici, who is widely touted to replace Olli Rehn as Economic and Monetary affairs commissioner, earlier today. 3.33pm BST15:33 Despite expectations the ECB is close to introducing new stimulus measures to boost the eurozone economy, it may not happen at next week’s meeting after all. According to a Reuters report the ECB is unlikely to take action next week unless August inflation figures, due on Friday, show the eurozone moving significantly closer to deflation. The Reuter’s report quoted a source saying “The barrier to QE is still high” and suggesting the discussion at the ECB’s meeting was likely to centre on reforming existing policy measures of credit easing and liquidity provision. The source added: “It’s hare to say now that nothing will happen. It depends to some extent on the data.” So, they don't know? RT @TradeDesk_Steve: New Ecb Action Next Week Unlikely But Outcome Much Depends On August Inflation Data - Ecb Sources Updated at 3.36pm BST 2.54pm BST14:54 Wall Street has opened and, in common with the European markets, it seems uncertain which way to go after its record breaking gains. The Dow Jones Industrial Average is virtually flat (down 3.85 points to be precise) while the S&P 500 has edged up 0.46 points. Meanwhile the FTSE 100 has dipped 3.54 points after early attempts to edge higher, while Germany’s Dax is down 2.12 points while France’s CAC is up 2.92 points. 2.33pm BST14:33 It looks like the European Central Bank is indeed readying itself for further measures to stimulate the flagging eurozone economy, as its president Mario Draghi suggested in the US on Friday. According to a report on Bloomberg, the ECB has appointed investment manager BlackRock to advise on developing a program to buy asset-backed securities: BlackRock Solutions, a unit of the New York-based company, will provide advice on the design and implementation of a potential ABS-purchase plan, an ECB spokesman said in response to e-mailed questions. Safeguards against any conflict of interest are included in the agreement, the spokesman said. ECB President Mario Draghi said in June that the central bank is intensifying preparations to purchase ABS as it strives to revive the faltering euro-area economy. While the effort could help revitalize a $1.9 trillion market that has contracted 34 percent since 2009, and at the same time inject liquidity into the financial system, officials have yet to agree on what such a program should look like. BlackRock’s contract requires it to ensure effective separation between the project team working for the ECB and its staff involved in any other ABS-related activities, the spokesman said. The final decision on the design and implementation of any ABS-purchase program will be taken by the ECB’s Governing Council, and the execution will remain the responsibility of the central bank, the spokesman said. Meanwhile French prime minister Manuel Valls has added his voice to demands for the ECB to act: French Pm Says Trusts Ecb To Use All Available Tools To Meet Inflation Mandate, Says More Needs To Be Done 2.02pm BST14:02 With the French government collapsing over the weekend after a rift over austerity measures, leading to a new cabinet announced yesterday, the debate over cutbacks and spending is back in the spotlight. So what to make of this: France, Italy Seen Likely To Push Together Against Austerity: EU Officials - MNI 1.05pm BST13:05 Lunchtime summary To recap... Christine Lagarde’s position as the head of the International Monetary Fund is under scrutiny today after magistrates put her under formal investigation, over the Bernard Tapie fraud inquiry. Lagarde has insisted that she will not resign, and will fly to Washington to brief the IMF board. She told AFP: “I have instructed my lawyer to appeal this decision which I consider totally without merit. “I return back to Washington where I will indeed brief my board.” Lagarde’s lawyer, Yves Repiquet, has told reporters that the charge is a ‘minor’ one, but carries a maximum penalty of one year in prison and a fine of €15,000 if convicted. Full story: Christine Lagarde to be investigated for alleged role in political fraud case Elsewhere... There are new concerns over the strength of the eurozone economy, after a stream of disappointing economic news. German consumer confidence has been hit by the escalating tensions with Russia, the unrest in Iraq, and the conflict between Israel and Gaza. Economic expectations have tumbled at their fastest rate in at least 30 years, with pollsters warning that the economy has shifted down by a couple of gears. Italian consumer confidence has also fallen, with citizens more gloomy about its prospects. Matteo Renzi’s government is expected to cut its growth forecasts soon, according to its economy minister. And industrial confidence in France has dipped, a reminder of the challenges facing Francois Hollande’s new government. The news helped to drive the yields on eurozone government bonds down to new lows, as investors anticipate weak growth, low inflation, and perhaps a QE programme from the European Central Bank. In the UK.... Royal Bank of Scotland has been fined £15m for failing to give mortgage customers decent advice. Labour’s shadow business secretary, Chuka Umunna, dubbed the findings “shocking and disappointing”. Tesco’s market share has fallen again, as price wars continue to hurt Britain’s supermarkets (good news for consumers though!). Estate chain Foxtons has warned that London house price growth is easing. And talk of a possible takeover bid for ASOS has driven its shares up 15% today. My colleague Nick Fletcher will be along shortly to cover the afternoon’s developments. Cheers. GW Updated at 1.07pm BST 12.50pm BST12:50 Another photo from Paris, of Christine Lagarde speaking to her lawyer, Yves Repiquet, today. Updated at 12.50pm BST 12.48pm BST12:48 So, how serious is a charge of negligence? The Financial Times says it could potentially lead to a prison term (we’re a long way from that at this stage, though) From Paris, Hugh Carnegy reports: Ms Lagarde’s spokesman told the FT that the charge was relatively minor but one that nevertheless carried a maximum penalty of one year in prison and a fine of €15,000 if convicted. 11.59am BST11:59 The AFP news agency has confirmed that Christine Lagarde has no plans to resign. From the wires: The investigating commission of the court of justice of the French Republic has decided to place me under formal investigation,” she said in exclusive comments to AFP. In France, being placed under formal investigation is the nearest equivalent to being charged, and happens when an examining magistrate has decided there is a case to be answered. It does not, however, always lead to a formal charge. “I have instructed my lawyer to appeal this decision which I consider totally without merit. “I return back to Washington where I will indeed brief my board.” Asked whether she intended to resign from the IMF, she responded: “No.” 11.51am BST11:51 Lagarde’s lawyer, Yves Repiquet, has told Reuters that the IMF chief believes the decision to formally investigate her for negligence over the Bernard Tapie case was unfounded: “We are appealing it,” Repiquet said by telephone, adding that Lagarde, who was due to return to IMF headquarters in Washington later on Wednesday, had no plans to resign. Reuters also explains how several members of Nicolas Sarkozy’s cabinet are ensnared in the Tapie payout probe. The list includes former Lagarde aide Stephane Richard, who is now FranceTelecom CEO. In previous rounds of questioning, Lagarde accused Richard of having used her pre-printed signature to sign off on a document facilitating the payment, local media has said. However Richard has stated that Lagarde was fully briefed on the matter. Updated at 11.52am BST 11.35am BST11:35 Christine Lagarde has been questioned for 15 hours yesterday by the Court of Justice of the Republic over her involvement in the Bernard Tapie case, flags up City AM. 11.16am BST11:16 Christine Lagarde under formal investigation over French fraud case Christine Lagarde, head of the International Monetary Fund, has been placed under formal investigation by French magistrates who are investigating a political fraud case that has gripped the nation. Lagarde, the former French finance minister, announced the development this morning, and insisted that the decision to investigate her for negligence was unfounded. She has no intention to resign, and plans to return to her work at the IMF in Washington later today. IMF chief Christine Lagarde has been put under formal investigation for negligence in fraud case. Says no intention of resigning. Lagarde has been questioned by magistrates on several occasions, and her flat was searched in March 2013. The case centres on French tycoon Bernard Tapie, who was a close friend of former president Nicolas Sarkozy. Back in 2008, Tapie was awarded more than €400m from the French state after claiming negligence against Crédit Lyonnaise for selling German sportswear brand Adidas too cheaply (the FT has a good backgrounder here). Critics say the deal was too generous, and an example of the cosy relations between Sarkozy’s administration and business. As finance minister, Lagarde set up the arbitration panel that decided the payout. Updated at 12.02pm BST 10.52am BST10:52 Britain’s supermarkets remain locked in a toe-to-toe price war, meaning prices are rising at their lowest rate since at least October 2006. Grocery price inflation fell for the eleventh consecutive quarter to just 0.2%, according to the latest figures from Kantar Worldpanel. And several big names lost ground again, as my colleague Sarah Butler reports: The battle to cut prices on staple items such as vegetables, milk and bread all drove down inflation over the summer. Of the UK’s biggest six supermarkets, only Asda and Waitrose managed to increase their share of the market in that tough environment while Tesco, Morrisons, Sainsbury’s and The Co-op all lost ground. Tesco was the biggest loser as sales fell 4% in the 12 weeks to 17 August driving it down to a market share of 28.8% more than 1 percentage point less than a year before. The figures mark out the scale of the challenge for incoming chief executive Dave Lewis who takes charge of turning around the UK’s largest retailer in October. 10.41am BST10:41 In the City, speculation that a US e-commerce giant could snap up British online fashion success ASOS has sent its shares up 15% this morning, having gained 7% yesterday. More in Nick Fletcher’s market report, along with all the key moves this morning: FTSE pauses for breath but Asos jumps on US takeover speculation 10.13am BST10:13 Italian consumer confidence falls Italian consumers, like their German counterparts, have suffered a drop in confidence this month. But their worries are mainly domestic based, as they watch the Italian economy slide back into recession. The monthly confidence climate index calculated by ISTAT fell sharply to its lowest level since March, down from 104.4 to 101.9. Italian consumer confidence falls more than expected: Index down to 101.9 in August, from 104.4 in July (RT poll was 104.4) - ISTAT Consumers said they were less optimistic about the state of the economy, their personal situation, current economic conditions, and future prospects. The steepest decline was seen in sentiment on the country’s economic situation.The survey showed Italians expected unemployment to continue to rise and saw no pick-up in consumer prices. 9.49am BST09:49 Shorter-term German bond yields are now in negative territory, meaning investors are actually paying for the chance to own one, two, and three-year bunds. German government bond yields are now negative out to 3 years pic.twitter.com/0482E0tEIJ 9.47am BST09:47 The tumble in eurozone bond yields is a clear signal that investors expect the eurozone to become bogged down in a low-growth, deflationary spiral, repeating Japan’s experience over the last two decades. The Euro Abenomics trade is ON. Italian 10-years yield hit new record low at 2.375%, German 10-years yield hit new record low at 0.921%, 9.41am BST09:41 I'd love to know who's buying German 10 years bunds with a sub-1% yield. Anyone owning up? 9.40am BST09:40 German bond yields hit record low The yield, or interest rate, on German 10-year bonds has hit a new record low this morning. Strong demand for German 10-year bunds has pushed their price to new highs, meaning they are now yielding just 0.917% this morning. Other eurozone bonds area also rallying. There is anticipation that the European Central Bank will announce fresh stimulus measures soon. Today’s drop in German consumer confidence adds to the pressure on the ECB. DZ Bank strategist Daniel Lenz explains: “When the EMU’s largest economy is falling behind, this is very much increasing the chances of the ECB heading for further monetary measures, above all QE.” Updated at 9.46am BST 9.20am BST09:20 Foxtons: London housing market is cooling Foxtons, the London estate agent famous for pushy sales tactics and garish Minis, has sounded a cautious note on the housing market. Shares in Foxtons have fallen 6% this morning, even though it announced a special interim dividend and a 57% jump in pre-tax profits for the first half of the year. And that’s because the company has flagged up that new affordability tests are starting to cool the London housing sector, after a “strong” start to the year. Foxton’s told shareholders that: The range of policy initiatives introduced in 2014 aimed at controlling mortgage lending, together with the expectation of early increases in interest rates, is now having an impact on short term demand among buyers. Consistent with others in the sector, we expect this to lead to lower rates of market growth in both property sales transactions and prices during the second half of the year. Updated at 9.20am BST 9.16am BST09:16 Labour: RBS mortgage misselling should have been addressed faster Labour’s shadow business secretary, Chuka Umunna, says he’s shocked by the poor sales practices exposed at RBS and NatWest today. He’s also alarmed that it too so long to address them. Taking out a mortgage is the biggest purchase a consumer makes and, as such, the FCA findings into RBS are both shocking and disappointing. Swap misselling by banks to small businesses happened 8yrs ago - this mortgage misselling by RBS was happening less than 18months ago! The FCA raised concerns with RBS on mortgage sales in 2011- it's disgraceful this was not immediately acted on. We still have some way to go in reforming our banking sector so it serves individuals and businesses - the real economy - properly. 9.05am BST09:05 Budget airline Ryanair has taken another step towards scrubbing up its image, launching a new business class service today. Features include “ flexible tickets, more check-in baggage, priority boarding and ‘premium’ seats”, as it tries to lure more executives onboard. However, it’s a rather trimmed-down business class -- people get larger seats, or be separated from the rest of the plane. Full story: Ryanair launches business class flights Updated at 10.03am BST 8.52am BST08:52 RBS in the dock over poor sales practices Britain’s banking sector continues to demonstrate a remarkable inability to treat its customers properly. Today’s culprit is Royal Bank of Scotland, which has been fined £14.5m for failing to offer decent advice to mortgage customers. Britain’s financial watchdog, the FCA, said RBS and NatWest salespeople often provided poor advice: Only 2 of the 164 sales reviewed were considered to meet the standard required overall in a sales process. In the firms’ own mystery shopping there were examples of advisers giving personal views on the future movement of interest rates. This was highly inappropriate and may have resulted in the borrower being sold the wrong type of mortgage for them. More here: RBS fined £14.5m over mortgage advice RBS has already agreed that it failed to give customers the best service, and says it has retrained staff to avoid a repeat. Ross McEwan: “Taking a mortgage is one of the biggest moments in our lives, and our customers should expect the best service” (2/5) “In the past we just didn’t get this right; this was unacceptable and should never have happened” (3/5) 8.36am BST08:36 German consumer confidence had been steadily rising over the last 18 months until today’s drop (see 8.00am for details), as this tweet shows: German consumer climate falls in September: GfK index drops to 8.6 pic.twitter.com/W9dKQm77cZ So is it just a blip, or the start of something serious? It may all depend on whether tensions in Russia and the Middle East decline, or deteriorate further. As GfK explains: Major upheavals in the global economy have so far only affected the consumer mood in Germany to a very limited extent. In order to ensure that this remains the case for consumers in future, it is important that the situations in the crisis regions do not escalate further and that long-term solutions are found instead. However, if domestic framework conditions also deteriorate decisively as a result of any potential further escalation, it is probable that more difficult times will also lie ahead for the German economy. Updated at 8.39am BST 8.32am BST08:32 Italy to lower growth forecasts Italy’s economy minister has predicted that it could lower its growth forecasts – making it a hat-trick of bad news for the eurozone this morning The Italian governent currently predicts that GDP will rise by 0.8% this year, but that was before Italy fell back into recession. A rethink is now needed. Pier Carlo Padoan told the Corriere della Sera newspaper that: “We must revise the GDP (gross domestic product) growth forecast to the downside.” Reuters reckons that could bring the government into line with most economists who expect little or no growth for the euro zone’s third-largest economy this year. Italy to revise down its GDP growth forecasts. French government too busy to think about that right now. 8.18am BST08:18 French industrial morale falls Bad news from France too -- morale among French companies has fallen again. Statistics body INSEE reports that the industry morale dipped again in August, to 96 from 97 on its monthly survey (where 100 is the long-term average). Worryingly, production expectations remain low - suggesting French producers see little sign that fortunes will pick up soon. Order books, and export orders, look weak too, particularly among manufacturers of electrical and electronic equipment, machinery, and transport. 8.00am BST08:00 German consumer confidence weakens as geopolitical risks rise German consumer confidence has suffered its first fall since January 2013, as the weakening eurozone economy and geopolitical risks hit Europe’s largest economy. The forward-looking survey of German morale, by polling firm GfK, found that economic expectations have ‘collapsed’ this month, as the wider consumer climate suffers a setback. Uncertainty over the German economy has risen, after it shrank in the second quarter of this year. And the deteriorating situation in Iraq, Israel and Eastern Ukraine and the “gradually accelerating spiral of sanctions” against Russia have also forced Germans to reevaluate their previously extremely optimistic economic outlook. That has sent economic expectations tumbling, in the biggest slump since the survey began 34 years ago. As GfK puts it: “Consumers are increasingly taking the intensified geopolitical situation into consideration in their assessment of how the German economy will develop over the coming months. The indicator dropped by 35.5 points, plummeting to 10.4 points. A decline of this magnitude in just one month has not been recorded since the survey began in 1980. Consequently, virtually all improvement in the economic expectations indicator over the past year has been negated in one fell swoop. In August 2013, the indicator value was 1.8 points. Given Germany’s close trade links with Russia, the Ukraine crisis is seen as a major threat. GfK says: Consumers are expecting the economy to shift down a gear or two at least. Given that no long-term solutions appear to be on the cards yet for any of the crises, uncertainty is rising in the population on the potential consequences for the German economy. In particular, the sanctions against Russia, which are already significantly impacting exports, could become a real risk for the German economy. As this tweet shows, consumer morale had been rising in Germany for the last year. Not any more... German Consumer Confidence: Actual: 8.6 vs Forecast: 9 pic.twitter.com/JodHiKbXfl The ‘Income expectations’ and ‘willingness to buy’ have both fallen; a blow to hopes that free-spending German consumers could drag the eurozone economy through its current malaise. The full report is here. Updated at 8.36am BST 7.54am BST07:54 Coming up.... Good morning, and welcome to our rolling coverage of the financial markets, the world economy. Coming up today -- a new survey of German consumers has found that confidence has been hit by economic weakness in the eurozone, and geopolitical threats across the globe. Royal Bank of Scotland is being fined almost £15m for failing to offer decent mortgage advice to customers (the news broke last night). In the City, upmarket estate agent Foxtons has is reporting strong sales as the housing boom filters through to its pockets. And Ryanair has launched its business class service. While European stock markets are expected to dip a little after a couple of days of decent gains, fuelled by strong economic data in the US and the prospect of more monetary stimulus in Europe. All this, and more, coming up.... Updated at 7.57am BST |