Greek bonds rally as PM says bailout breakthrough is close

http://www.theguardian.com/business/live/2015/apr/28/greek-pm-bailout-close-markets-uk-gdp

Version 0 of 1.

5.31pm BST17:31

European markets close lower

Mixed company results, uncertainty ahead of the UK general election and - more immediately - the latest comments from the US Federal Reserve on interest rates due on Wednesday combined to send shares sharply lower. So despite some optimism that Greece could resolve its financial crisis, now its negotiating team has been restructured, investors remained cautious. The final scores showed:

On Wall Street, the Dow Jones Industrial Average has added 50 points or 0.28%.

On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back tomorrow.

5.11pm BST17:11

Hopes that a deal between Greece and its creditors can be done before the country runs out of cash continue to support the country’s bonds:

Greece 10Y benchmark bond mid-yield: 10.83%; Spread v. 10Y German bund 1066.50; -73.50 bps from prev close #EUGV

5.09pm BST17:09

Here’s our story on the Iranian ship situation:

Related: Iran seizes Marshall Islands cargo ship in Persian Gulf, Pentagon says

4.21pm BST16:21

And it now appears the ship supposedly seized by Iran was not American after all:

Update: RTRS citing Pentagon spokesperson says detained ship was Maersk Tigris cargo vessel flying under Marshall Islands flag

3.57pm BST15:57

Back with Greece and the head of the Eurogroup has said that the shake-up of Greece’s negotiating team would not by itself resolve the impasse between the country and its creditors, and it would still need new loans. Jeroen Dijsselbloem said:

Without further loans, Greece won’t make it, that’s the reality.

Reuters has the story:

Dijsselbloem said in a television interview it may be of some help that the Greeks have appointed a single contact person for negotiations, with Greek Finance Minister Yanis Varoufakis apparently sidelined.

But he said there had been little progress in negotiations over the past two months, and signalled he did not think a Greek referendum on a deal with creditors would be a good idea. Tsipras has said he may submit an eventual deal to the Greek people for approval if its terms are contrary to the platform he campaigned on.

“It would cost money, it would create great political uncertainty, and I don’t think we have the time,” Dijsselbloem said. “And I don’t think the Greeks have the time for it.”

The Dutchman said it should not have come as a surprise to Greece’s government that the European Central Bank has not relaxed limits on how much Greek government debt its banks may use as collateral.

“The Greek government gambled that if it negotiated with us the ECB would open its cashier windows, relax its rules,” Dijsselbloem said.

But “there will be no easy access to the ECB’s windows until there’s a solid agreement with the Eurogroup,” he told RTL Nieuws. “That’s been made clear to them time and time again.”

3.38pm BST15:38

Sentiment in the markets has not been helped by unconfirmed reports that Iran has seized a US ship...

#BREAKING: Iran holds U.S. ship, 34 sailors http://t.co/0S2aWYcLEV

Updated at 3.59pm BST

3.23pm BST15:23

The disappointing US consumer confidence figures have sent markets sharply lower - even lower than they were.

Worries about the state of the US economy have been revived by these latest figures, another set of weak data. But with the US Federal Reserve still keen to raise interest rates when it can, there are now conflicting views on the way ahead. Dennis de Jong, managing director at UFX.com, said:

Fed Chair Janet Yellen will be slightly dismayed at the lower than expected consumer confidence figures released today.

Most observers had predicted the levels of consumer confidence to rise, but gasoline prices that are steadily ticking upwards appear to have taken their toll. Though an interest rate rise is still on the cards for the world’s biggest economy, US GDP is forecast to have slowed in the first quarter, which is posing more questions than answers. Yellen will have to wait and see before acting on interest rates.

The news has sent the Dow Jones Industrial Average down around 90 points, while the FTSE 100 has dropped below 7000 and is currently around 107 points lower at 6996. Germany’s Dax is down 255 points or more than 2% but the Athens market is holding on to its gains, up 2% on hopes a deal could finally be reached with the country’s creditors.

Much lower than expected US consumer confidence sends #dollar #USD lower. #GBPUSD above 1.5300, #EURUSD at 1.0965

Fall in US consumer confidence attributed to a lackluster recent labor market and apprehension about the short-term outlook

Updated at 3.33pm BST

3.09pm BST15:09

US consumer confidence slumps in April

Away from Greece, and as the Federal Reserve begins its two day meeting, US consumer confidence has come in lower than expected.

According to the Conference Board, the confidence index was 95.2 in April, much lower than the forecast of 102.5 and down from 101.4 in March. Inflation rate expectations were the lowest since February 2007.

Conference Board is now the lowest of the 3 US CCI pic.twitter.com/XsGncHm8MF

Updated at 3.12pm BST

2.38pm BST14:38

Summary: Deal by May?

A quick recap.

Another day, another deadline... This time analysts are pencilling in May 9th as a crunch day for Greece, after prime minister Alexis Tsipras claimed Athens could reach an agreement with its creditors by the end of next week.

Greek bonds have strengthened today, on hopes of a deal. The yields on its two-year bonds has dropped sharply to 20.3%, from 22.8% last night. The odds of a Greek default have fallen too.

Greek 10 years now down another 72 bp at 11% - lowest for a couple of week as the mkt reacts positive to the sidelining of Varoufakis

Tsipras has also ignited talk about a possible referendum, after warning that he can’t sign up to a deal that breaches the promises that brought him to power.

Many economists think a deal be reached in time But Wolf Piccoli of Teneo Intelligence explains there’s a 45% that capital controls could be imposed first:

#Greece's options as outlined by Teneo Intelligence's decision tree # lookingahead http://t.co/NG99Ald1hs pic.twitter.com/RjdPR0cI6G

The eurozone has also been digesting yesterday’s reshuffle of Greece’s negotiating team, which has reined in finance minister Varoufakis.

EU Commission spokeswoman Annika Breidthardt told reporters that talks “have intensified” since Friday’s Eurogroup meeting, where Greece was heavily criticised for lack of progress. Negotiations “are being made more productive and efficient”, she added.

Austria’s finance minister has said he hopes the shake-up will spur Greece onto a deal.

Varoufakis, meanwhile, has announced plans for a new tax amnesty for Greeks with money held in Swiss banks.

And in the UK, growth has slowed sharply to just 0.3%, weaker than expected:

Related: UK economic growth halves ahead of general election

Updated at 2.39pm BST

2.02pm BST14:02

Yanis Varoufakis has announced plans to encourage Greeks to declare assets held in Switzerland to avoid tax.

After seemingly having his wings clipped yesterday, Varoufakis been cracking on with the nitty-gritty work of being a finance minister.

This includes a meeting Switzerland’s deputy minister for International Financial Affairs, Jacques de Watteville.

And speaking to reporters afterwards, Varoufakis said the Athens government would launch an amnesty for undeclared foreign assets, reportedly to be taxed at just 15%.

#Greece gov't considers a draft bill for 'voluntary' declaration of Greek deposits in Swiss banks (via @amna_news) #economy

It’s not the first time Greece has tried such a measure, though; success has been limited to date.

There was a similar law for 'asset repatriation' passed in 2004 with a 3% (!) one-off tax and results were meager. #Greece

Updated at 2.02pm BST

12.48pm BST12:48

Could Greece be heading for a referendum?

There’s a lot of chatter today that Greece could be heading towards a referendum.

Alexis Tsipras lit the speculation during last night’s TV interview, when he explained voters had not given him permission to sign up to the old bailout programme.

He said:

“If the solution falls outside our mandate, I will not have the right to violate it, so the solution to which we will come to will have to be approved by the Greek people.”

Since #Tsipras' interview last night the referendum solution is officially on the table #Greece

And with Tsipras ruling out fresh elections, and Germany insisting that Greece meets its commitments, a referendum could indeed be needed.

The PM could potentially find that he can’t get a deal past his own Syriza colleagues, if it includes labour market reforms or privatisations that they campaigned against in January’s general election.

2 ways to read Tspiras referendum talk: increase in uncertainty or commitment to appeal to Greek people if Syriza harder edge against deal.

However, it’s not a simple issue.

The Greece constitution allows referendums for matters of critical national interest, and social issues, but not on fiscal matters.

Scenario: Greece cuts deal that exceeds Syriza mandate, takes it to referendum Question: what result would be required? Majority? Plurality?

@mdbaccardax Plurality. Yet there are constitutional hurdles to such a referendum: Constitution forbids referendums on fiscal issues.

And of course, does Greece have time to organise a referendum before running of cash?

Question: What is the "fastest" the Greek govt is legally allowed to conduct a referendum, since the day it is called? #Greece #Syrizanel

12.22pm BST12:22

Greek bonds are continuing to rally, on optimism that a deal will be reached to avert the danger of default:

#Greece's 5yr default probability drops below 80% on fresh bailout hopes as majority of Greeks favour agreement. pic.twitter.com/eeiwDnHQso

12.17pm BST12:17

Just in -- photos of Yanis Varoufakis following a meeting with Alexis Tsipras this morning.

They show Varoufakis still has the ear of the PM (who called him a valuable asset last night)....

...and that Greek citizens are still keen to speak with their ‘rock star’ finance minister.

11.26am BST11:26

Austrian finance minister hopes the new Greek negotiating team makes progress, fast.

Reuters has the details:

Hans Joerg Schelling told reporters before a cabinet meeting that he learned of the move only via media reports but that it was “in order” for Tsipras to change the team, adding that “it just has to be quick...I hope we don’t start again at zero.”

“We hope...that the Greek government now gets out of the headlines, that they concretely back up measures with laws, valuations and schedules,” he said.

Updated at 11.26am BST

11.17am BST11:17

Another encouraging sign. The European Commission says that contact between Greece and its creditors have “intensified”, meaning negotiations are progressing.

#EC's spox on #Greece: Contacts have intensified and allowed work to progress

11.10am BST11:10

Economist Intelligence Unit: Greek deal still possible

Despite the lack of progress, Joan Hoey of the Economist Intelligence Unit reckons Greece and its creditors can still break the stalemate in time.

That’s partly because Eurozone leaders can’t be certain how serious a Grexit would be....

The modus operandi of the euro zone is to seek compromise and to avoid incalculable risks. Especially after the 2008 global financial and economic crisis, risk aversion is so strongly entrenched in every single international organisation that few political leaders are prepared to gamble on Grexit. Against the backdrop of a fragile euro zone economic recovery and the tense geopolitics over Russia/Ukraine, letting go of Greece would mean stepping into “uncharted waters” as Mario Draghi, ECB president, put it. No matter what they might say about the euro zone being “ring-fenced” against contagion, and no matter how frustrated they are with Mr Varoufakis et al, euro zone political leaders do not want a Grexit.

....and partly because the Greek people want to remain in the eurozone:

Despite deep popular resentment of the austerity policies tied to the bailout programme, the vast majority of Greeks want to stay in the euro zone. This is a constraint on how far the Syriza government can push back in its negotiations with the Eurogroup. As time has gone on and the government’s hardline stance has failed to wring concessions and heightened Grexit risk, popular support for the government’s confrontational approach has ebbed.

The conceit nurtured by Syriza during its election campaign that it could reject bailout conditions but keep the country in the euro zone has been exposed”.

10.52am BST10:52

Back in Athens, a senior government MP has criticised the decision to shake up Greece’s negotiating team and sideline finance minister Varoufakis.

Enikos has the details:

Speaking on private ANT1 TV, Alexis Mitropoulos, the Greek Parliament’s First Deputy Speaker, said that “Yanis Varoufakis was the ideal negotiator and we should have backed him up further.”

Mitropoulos further said that will not vote for any austerity measures and that the government should call for a referendum before agreeing on any deal with the creditors.

Updated at 10.56am BST

10.44am BST10:44

Here’s our own Angela Monaghan’s story on the disappointing UK growth figures:

Related: UK economic growth slows ahead of general election

10.39am BST10:39

Hello again. While I was off helping with our coverage of the UK growth figures, Yanni Kouts has been monitoring events in Greece:

#Greece PM Tsipras meets FinMin Varoufakis; to brief Syriza parl group later today over state of play with country's creditors.

#ECB's Cœuré says #Greece's exit from the #euro zone is not "a scenario that we are working on."

9.44am BST09:44

Our Politics Live blog is taking the lead on today’s surprisingly weak UK growth figures:

Related: Election 2015: UK GDP growth slows to 0.3% - live

9.39am BST09:39

UK Q1 #GDP in detail: Services +0.5% (Q4 +0.9%), Industrial output -0.1% (Q4 +0.2%), Construction -1.6% (Q4 -2.2%)

9.33am BST09:33

This feels like a big blow to the Conservative Party; economists had expected growth of 0.5%:

Wow ... economic growth slows to 0.3% in 1st 3 months of the year, half what is was the previous quarter and well below expectations.

9.32am BST09:32

UK growth slows

Breaking: The UK economy grew by just 0.3% in the first three months of 2015.

That’s a sharp slowdown on the 0.6% recorded in October-December 2014.

9.28am BST09:28

Nearly time to discover how the UK economy fared in the first three months of the year.....

9.21am BST09:21

Europe’s major share indices are all in the red this morning, with investors fretting that the rally may have gone too far.

European markets are still close to their highest levels in 14 years, and as Tony Cross, market analyst at Trustnet Direct, says:

Traders are struggling to find the justification to keep pushing stocks at these elevated levels.

Athens is bucking the trend, though -- the main AGT index is up 0.64% in early trading.

9.14am BST09:14

Here’s Sean Farrell on BP’s financial results:

Related: BP reassures on dividend after refining division shores up profits

9.05am BST09:05

Greek bonds are continuing to strengthen (but remain deep in the danger zone)

2-yr Greece Yields 21.08%, Down 107bps

8.52am BST08:52

Hat-tip to Wolf Piccoli of Teneo Intelligence for producing a detailed ‘decision tree’ that outlines the various paths which Greece could follow in the months ahead.

#Greece's options as outlined by Teneo Intelligence's decision tree # lookingahead http://t.co/NG99Ald1hs pic.twitter.com/RjdPR0cI6G

(there’s a clearer version online here)

Updated at 9.15am BST

8.37am BST08:37

Optimism pushes Greek yields lower

Greek bond yields are dropping this morning after prime minister Alexis Tsipras declared that an initial agreement with creditors could be reached by the end of next week.

The yield (interest rate) on Greece’s two-year debt has dipped from 22.8% to below 22.4%, meaning its price has risen slightly.

#Greece's bond yields nudge lower on Greek optimism. 2yr yield drops to 22.4%. pic.twitter.com/CRbAkNZ8Ft

8.27am BST08:27

Sentix: 49% of investors expect eurozone to break up

Nearly one in two investors expect Greece to leave the eurozone in the next 12 months, according to a regular survey by German research group Sentix.

Sentix’s Euro Break-up Index jumped to 49.0% this month, from a previous 36.8%, showing a higher risk of Grexit.

That’s the highest since the summer of 2012, before ECB chief Mario Draghi promised to do “whatever it takes” to protect the single currency.

It says:

European politicians’ promises to pursue the scenario of Greece keeping the euro are not taken at face value by about the half of all investors. In 2012 Mario Draghi calmed down investors with his ultimate commitment to the euro.

But is his pledge still valid for Greece today?

One note of caution: the interviews took place between Wednesday April 23 and Friday 25 April, so before Alexis Tsipras appointed new negotiators.

Draghi put to the test: one out of two investors expects a “Grexit” | sentix Euro Break-up Index... http://t.co/VbWWdY59BD

Updated at 8.39am BST

8.18am BST08:18

Stan Shamu of IG confirms that investors are more upbeat about Greece, thanks to the shake-up of its negotiating team and Alexis Tsipras’s comments overnight:

Europe has led the way this week and this is still on the back of optimism around Greece. There are some interesting developments in Greece at the moment with the country reshuffling its bailout negotiating team and forcing Finance Minister Varoufakis to the sidelines. Mr Varoufakis was seen by some as being part of the problem and as a result news of him being sidelined has been well received.

The bailout negotiating team met in Athens yesterday and is looking at some of the reform measures the Eurozone has been wanting to see.

Prime Minister Alexis Tsipras is also said to be getting ready to suspend the minimum wage plan with an overall comprehensive package expected to be concluded by early May. Clearly Greece is now starting to play ball and it’ll be interesting to see how the population reacts to the developments.

Despite all this, I will reinforce my feeling that the numbers simply do not add up for Greece and we are likely to be back to square one in the not so distant future. The writing is on the wall for Greece and while a last minute deal is likely to be reached, many will be questioning how much longer the Eurozone will be willing to carry a wounded partner through the recovery.

8.10am BST08:10

Greece - there was considerable optimism last night as the market reacted positive to the leaks

8.04am BST08:04

Alexis Tsipras: I believe an initial deal is close

There’s a sense of optimism this morning after Greece’s prime minister declared an initial deal with the country’s creditors could be reached by the end of next week.

In a late-night interview with Star TV, Alexis Tsipras said that:

“Our goal... is to reach a first agreement this week if possible, or next week at the latest....I believe we are close.”

Tsipras says he hopes there'll be initial deal at Brussels Group this week/next week at latest. "We're close to a minimum package" #Greece

But...Tsipras did also caution that issues including pension cuts, mass layoffs and VAT increases are all still ‘on the table’, suggesting Greece hasn’t yet compromised.

Tsipras explains resistance to raising VAT on islands is because lower rates are there to balance higher costs faced by islanders #Greece

And while Tsipras said an early election was off the table, he could be forced to call a referendum:

“If I end up having an agreement that puts me outside the limits (of my mandate), I will have no other resort....The people will decide obviously without elections, I want to make that clear.”

#SYRIZA #Tsipras #interview, answering voters questions http://t.co/F3JKkhPhGn #Merkel #Varoufakis #Draghi #Eurogroup pic.twitter.com/oplkoFdT5V

In a wide-ranging interview, Tsipras admits that uncertainty this year did mean Greece faces the “danger of recession”

Tsipras also blamed the previous government for creating Greece’s current predicament, and said Europe must share the blame if a deal isn’t reached on time.

He also defended his embattled finance minister, saying Yanis Varoufakis remained a key ‘asset’ for Greece, despite his ructions with fellow finance chiefs.

Tsipras says Merkel has shown intention for deal with #Greece. Failure to reach agreement would be failure for her and Greek gov't #enikos

Tsipras says Varoufakis is a "significant asset" for gov't & #Greece, has full backing #enikos

Tsipras suggests enmity towards Varoufakis from EZ finmins is because they would prefer to deal with someone who is compliant #Greece

8.02am BST08:02

The Agenda: Greek talks, and UK GDP

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

Coming up today..... Greece’s new bailout negotiating team are getting down to work after yesterday’s shake-up left finance minister Yanis Varoufakis on the sidelines.

There are already signs of progress. Last night, the Greek negotiators agreed to draw up a multi-bill including several reforms to put to parliament.

As we reported last night, Varoufakis paid the price for the lack of progress this year:

Reacting to the news, a senior European Union official confided that it had become “impossible” to do business with Varoufakis. “It had got to the point where eyes roll,” he said.

“People had got sick and tired of being lectured about austerity and the effects of the crisis. Any sympathy for Greece was eroded by his failure to draft concrete proposals.”

Related: Greece tries to ease tensions with lenders by reshuffling negotiating team

Just published: front page of the Financial Times UK edition Tue Apr 28 pic.twitter.com/s10qwPvOPG

The shake-up has boosted hopes that a breakthough could finally be in sight.

Last night, Greece’s PM claimed that a deal with creditors is “very close”, but also suggested a referendum could be called if the two sides can’t reach agreement (more on that shortly).

We get fresh UK growth figures at 9.30am this morning, showing how the economy performed in the first three months of this year.

Economists expect a slight slowdown to +0.5%, from 0.6% in the last quarter of 2014. It’s the last major piece of economic news before May’s general election, so expect lots of political reaction.....

European stock markets are expected to fall, after yesterday’s rally drove the FTSE 100 to a new record high.

And traders will be digesting results from oil giant BP, which just reported that adjusted profits have slumped by a fifth, to $2.6bn. That’s better than expected.

Those BP first quarter numbers nowhere near as bad as expected. Interesting one to watch at 8 a.m. open. https://t.co/ngsoSsP5We

I’ll be tracking all the main events though the day....