Today Greek talks have improved with ‘constructive discussions’ set to continue according to the Institute of International Finance. The current conflict focuses around Greece’s minimum salary of €750 per month; the IMF say it is too high, but union officials claim a cut would drive more people into poverty and damage consumer spending even further.
Spanish 3-year bonds yielded at a reduced rate of 2.8% this morning, down from 3.38% just 3 weeks ago and 5-year notes sold with a yield value of 3.5%, also dramatically lower than its January equivalent, which sold at 5.5%. Spain’s bond auction success is part of a region-wide trend at the moment, where sovereign debt yields have fallen (apart from Portugal) since the ECB introduced €489 billion of cheap 3-year loans in late December. Reports suggest the European Central Bank may be looking to build upon its successful liquidity measures in the near-future by offering a further €1.2 trillion in low-cost 3-year loans.
Angela Merkel is in China today visiting the Chinese Premier Wen Jiabao and President Hu Jintao to give a speech on finance and foreign exchange policy at the Chinese Academy for Social Science. Merkel declared : “The Euro has made Europe stronger,” and insisted that EU members are deeply committed to following through with the new fiscal compact that was signed in Brussels on Monday. Chinese Premier Wen Jiabao said it is “very important” to resolve the Eurozone debt crisis and hinted that China could offer support, despite Chinese wealth fund chairman Jin Liqun, describing European labour laws as inducing ‘sloth’ and ‘indolence’ rather than ‘hardworking-ness’. Wen stressed that Europe must first help itself, through cutting its debt load and introducing new structural reforms.
Yesterday’s Manufacturing figures were surprisingly good for the UK with PMI rising to 52.1 – above the 50.0 level that marks the difference between contraction and growth. Today’s Construction PMI figures also managed to stay above 50.0 at 51.4, but they marked a decline of 1.8 from 53.2, which follows the major trend of negative growth in the UK economy. A fall in the Money Supply by -1.4% on Tuesday sparked fears that the Bank of England is planning to announce a further £75 billion of asset purchases in the form of Quantitative Easing in February to help boost growth figures.
The Pound to Euro Exchange Rate currently stands at 1.203 and the Pound to US Dollar Exchange Rate is 1.581 (GMT 14:57). The Pound is benefitting from a rise in risk-on trading.