UK unemployment has hit a fresh 17-year high after the public sector shed thousands more jobs than anticipated and as many economists predicted the private sector failed to pick up the slack. Youth unemployment increased holding above the record high of over 1 million and the total number of unemployed people rose to 2.64m over the three months to October, according to the official ONS figures. The Office for National Statistics said that at 8.3% the unemployment rate was now at its the highest since 1996.
European Central Bank governing council member Klaas Knot stated this morning that the eurozone rescue fund, or contribution to the IMF, must be at least €1tn. He said the buying of sovereign debt is just a temporary measure and that European leaders will succeed in solving the debt crisis only if the rescue fund is increased. Eurozone industrial output fell 0.1% in October, compared with a month earlier. It was 1.3% up on the previous year.
European leaders meeting in Brussels agreed to make bilateral loans to the IMF of as much as 200 billion euros ($270 billion), with 150 billion euros contributed by Eurozone members and 50 billion from other members of the EU. Prime Minister David Cameron has not referred to this obligation in any of his post-summit statements. The Telegraph this morning is reporting that Britain’s share of the €50bn is £30bn.
The MSCI All Country World Index had lost 0.4 percent by 10:35 a.m. in London. The Stoxx Europe 600 Index had fallen by 0.5 percent, whilst S&P 500 futures rose 0.2 percent. Copper dropped 1.6 percent. The yield on Italy’s five-year bond fell 10 basis points to 6.70 percent after the government sold the amount of debt it planned at an auction today. The cost of insuring against default on European sovereign debt approached a record. Italy’s five-year borrowing costs are expected to rise further above 6 percent on Wednesday, to mark a new euro lifetime high, at an auction that will provide a first test of bond market sentiment towards the euro zone after last weekend’s EU summit.
Measures agreed by European leaders to strengthen fiscal discipline have not convinced markets the debt crisis will be resolved and threatened rating downgrades for euro zone states averted, or curbed yields on outstanding Italian debt. Saddled with a debt equivalent to 120 percent of gross domestic product, Italy has seen its funding costs spiral towards unsustainable levels since taking centre stage in the debt crisis in early July.
The yield on the five-year BTP bond it will sell on Wednesday topped 7 percent on Monday, although it was able to sell short-dated debt on the same day at a slightly lower cost than the euro-era high levels seen a month before. Italy paid 6.3 percent in November to sell five-year bonds, its highest cost of borrowing since the single currency’s adoption in 1999.
Chancellor Angela Merkel is due to address Germany’s parliament today on the rescue package announced by European leaders for the region last week. The Fed said yesterday that the U.S. is maintaining growth even as the global economy slows, disappointing investors who expected a third round of asset purchases. The Munich-based Ifo institute cut its 2012 economic growth forecast for Germany, Europe’s largest economy, to 0.4 percent from 2.3 percent today.
The euro was little changed after falling 0.3 percent to $1.3005, the weakest since Jan. 12. The Norwegian krone strengthened versus 13 of 16 major peers tracked by Bloomberg before the central bank announces an interest-rate decision today. Norges Bank will lower its overnight deposit rate to 2 percent from 2.25 percent, according to a survey of economists, the first cut in more than two years.
The Swiss central bank may resist pressure from exporters to further curb the strength of the franc as officials avoid testing the credibility of their currency policy and take time to assess deflation risks. The Swiss National Bank, led by Philipp Hildebrand, will keep the franc’s minimum exchange rate at 1.20 per euro, according to 9 out of 13 economists in a Bloomberg News survey. The Zurich-based central bank will also maintain its benchmark interest rate at zero, when policy makers announce their decision at 9:30 a.m. tomorrow, a separate survey shows.
The franc, seen as a haven in times of turmoil, gained as much as 37 percent against the euro in the year before the SNB imposed the limit on Sept. 6, as European leaders failed to contain the debt crisis. It reached a record 1.0075 per euro on Aug. 9 and has traded in a range of 1.20 to 1.25 since policy makers imposed the cap.
The SNB had a record loss of $21 billion in 2010 after it purchased foreign currencies at an unprecedented pace in the 15 months through June to stem franc gains.
Market snapshot at 11:00 am GMT (UK time)
Asian Pacific markets suffered mixed fortunes in the overnight early morning trading session. The Nikkei closed down 0.39%, the Hang Seng closed down 0.5% and the CSI closed down 1.01%. The ASX 200 closed down 0.07%. European markets are down, the STOXX 50 is down 0.93%, the UK FTSE is down 0.73%, the CAC is down 1.42%, the DAX is down 0.85%. The SPX equity index future is up 0.2%. Ice Brent crude is down $0.81, Comex gold is down $28.9 per ounce.
Economic calendar data releases that may affect the afternoon session sentiment
12:00 US – MBA Mortgage Applications
13:30 US – Import Price Index November
A Bloomberg survey shows a median expected change of +1.0% (month on month) for imported prices compared with the previous released figure of -0.60%.The year-on-year figure is forecast to fall to +10.10%, from 11.0%.