Supreme court throws out Argentina’s appeal over 2001 default
Argentinian bonds tumble amid talk of new default
Argentine stock market dives 6%
IMF cuts US growth forecast this year to 2% from 2.8%
5.03pm BST
A quick recap:
Chart: Argentine CDS soars on Supreme Court rulings (up 700 basis points today) http://t.co/0PZu3FB0nl pic.twitter.com/kAq9mZHL4n
Wednesdays Bank of England minutes and Federal Reserve policy announcement could prove pivotal for sterling, assuming this weeks Financial Policy Committee meeting produces no big surprises.
If the two updates highlight the increasing policy divergence between the two central banks, GBP/USD could finally make a sustained break through the critical $1.7000 barrier, which could then potentially open up a move towards the $1.7100 to $1.7250 range.
4.50pm BST
All those geopolitical risks, from Iraq to Ukraine and beyond, sent European stock markets down across the board.
At the close of trading the FTSE 100 had lost 23 points to 6754, -0.3%. The French CAC had lost 0.6%, the Italian FTSE MIB is down 0.7%, and Spain’s IBEX shed 1.1%.
4.47pm BST
The cost of insuring Argentinian debt has also surged, as investors calculate that a default just become much more likely.
The ‘upfront cost’ of a five-year credit default swap surged from 36% to 46% – meaning it would cost almost half the face value of a bond to insure it each year.
4.27pm BST
4.24pm BST
Shares have tumbled in Buenos Aires after Argentina lost its appeal against repaying bonds held by hedge funds dating back to its 2001 default (see 3pm BST onwards for the story)
The main stock index has fallen by more than 6%.
4.14pm BST
Back to the other issue looming over the markets geopolitical risk.
And Capital Economics has warned that there are plenty of reasons to worry — Iraq for starters, as chief economist Julian Jessop writes:
Given the uncertainty across the region, it would obviously be foolish to rule out a further escalation of the crisis.
Global oil prices spiked above $120 both in early 2011 and 2012 and it was no coincidence that, on both occasions, the recovery in the world economy subsequently faltered.
Tripartite talks over Ukraines unpaid debts on Russian gas have collapsed. As a result, Gazprom has announced that it will now restrict supplies to Ukraine. This is likely to keep tensions high and could disrupt the flow of natural gas to Western Europe via Ukraine.
…tensions between China and other Asian countries, from Japan to Vietnam; the unresolved crisis in Thailand; fresh terrorist outrages in Nigeria and Kenya; economic and political instability in Argentina, Brazil and Turkey; and disillusionment with reform in India.
4.10pm BST
IMF urges U.S. to raise minimum wage from $7.25 an hour. Seattle’s is now $15 an hour http://t.co/dleX0hMDzQ pic.twitter.com/VmFFyKkfAb
4.03pm BST
Eric LeCompte, executive director of the religious anti-poverty organization Jubilee USA, has warned that Argentina’s defeat in the Supreme Court will encourage more ‘vulture funds’ to pursue countries in financial distress.
LeCompte says:
"I am blown away by the decision. For heavily indebted countries trying to support extremely poor people, this is a devastating blow. These hedge funds are equipped with an instrument that forces struggling economies into submission.
"For 15 years, Republicans and Democrats have agreed that the world’s poorest countries need to have their debt burdens reduced. Today, that bipartisan policy is threatened by the court’s decision.
3.55pm BST
Argentine President Cristina Fernandez will deliver a televised address at 9 pm local time (1am BST Tuesday), following the US Supreme Court’s rejection of its case against its bondholders.
That’s according to Argentine state-run news agency Telam (via Reuters)
3.40pm BST
Reuters has more details of how Argentinian bonds tumbled this afternoon after the US Supreme Court defeat raised fears of default. (see 3pm onwards)
Argentina bonds plunged 8 points Monday after the US Supreme Court declined to hear the country’s appeal against holdout creditors who refused to take a haircut on their bond holdings.
The repricing could get many times worse as Argentina has warned it could default if forced to make the full payment to those creditors.
3.31pm BST
This afternoon’s two courtroom defeats raises the threat that Argentina could be unable to meet its obligations in the bond markets.
As Bloomberg explains:
Supreme Court justices without comment today turned away contentions that lower court rulings misread Argentinas bond agreements and violated its sovereign immunity. The rebuff is a victory for investors, led by a Paul Singer-controlled hedge fund, who have refused to exchange their defaulted bonds for about 30 cents on the dollar.
The rejection leaves Argentina facing a court order to pay the holdouts in full before it makes payments on a separate $24bn in restructured debt. The country could try to negotiate a settlement, a step it so far has refused to take. Argentina says it cant afford to pay both sets of bondholders.
3.26pm BST
Crumbs, Argentina just lost a second case at the US Supreme Court.
Judges ruled in favour of bondholders, which means commercial banks will be forced to hand over information on assets which Argentina holds across the world.
Actually the court made mincemeat of Argentina’s argument in the discovery case (which will also extend creditors’ rights a lot)
No. RT @DanCancel: Could this day have gone any worse for Argentina at Supreme Court?
3.10pm BST
This chart shows how Argentina’s government bonds tumbled sharply this afternoon after it lost its appeal against repaying "holdout" bond holders:
Argentine benchmark bond off about 10 points pic.twitter.com/aN8moYNUOD
3.02pm BST
Breaking away from the IMF report — Argentina has suffered a serious legal defeat in the US court against a group of vulture funds.
The U.S. Supreme Court has rejected Argentina’s appeal against previous rulings that it should repay more than $1.3bn to hedge funds that hold some of the bonds which Buenos Aires defaulted on in 2001.
Argentina: Discount bonds (restructured) off 8 points at 75 vs Friday close.
The dispute stems from debt left unpaid when the Argentine economy crashed in 2001. Hedge funds led by billionaire Paul Singer’s NML Capital Ltd. bought some of the unpaid debt and refused to accept bonds of lesser value in exchange for regular debt payments. Holders of 92 percent of the defaulted bonds agreed to the deal.
Argentina has a restructured bond payment on June 30. So whatever it decides now, it might want to do it quickly
This could get messi…
2.53pm BST
Christine Lagarde is now discussing the IMF’s report into the US economy, here is a lifefeed.
Live webcast: Press conference by Managing Director Christine Lagarde on the United States Article IV Consultation – http://t.co/ARe8RK35Be
2.40pm BST
And this chart from the IMF shows how US poverty rates have risen over the last decade, with almost 50 Americans now living in poverty.
Given its current low level (compared both to U.S. history and international standards), the minimum wage should be increased.
This would help raise incomes for millions of working poor and would have strong complementarities with the suggested improvements in the EITC, working in tandem to ensure a meaningful increase in after- tax earnings for the nations poorest households.
2.33pm BST
Here are the new US growth forecasts from the IMF:
2.30pm BST
BREAKING: The International Monetary Fund has cut its forecast for growth in the United States this year after a harsh winter weather hit the worlds largest economy in the early months of 2014.
The downgrade comes in the IMF’s latest update on the US economy, which also highlights stubbornly high poverty rates, high long-term unemployment and stagnant wages.
Recent data … suggest a meaningful rebound in activity is now underway and growth for the remainder of this year and 2015 should well exceed potential. This renewed dynamism, however, provides only a partial offset to the weak first quarter.
As the economy strengthens, the current account deficit is expected to slowly widen with an increased demand for imports only partially offset by fiscal consolidation and the improvements in the trade balance that are linked to rising self-sufficiency in energy.
Job growth has been healthy but labor markets are weaker than is implied by the headline unemployment number: long-term unemployment is high, labor force participation is well below what can be explained by demographic factors, and wages are stagnant. With better growth prospects, the U.S. should see steady progress in job creation. However, headline unemployment is expected to decline only slowly in part because improving prospects will draw discouraged workers back into the labor force and long-term unemployment will take time to fall to historic levels.
The latest data showed almost 50 million Americans living in poverty and the official poverty rate has been stuck above 15% despite the ongoing recovery.
2.14pm BST
Greenpeace has suffered a 3.8m loss after a currency hedge went badly wrong.
The environmental charity agreed to buy foreign currencies at a set rate to protect itself from currency fluctuations, but ended up having its fingers burned.
@guardian @guardianeco We work in 40+ countries, but this should NOT have happened. See our full statement on here: http://t.co/JDawoGqXJg
2.04pm BST
The escalating insurgency in Iraq, and the cutting off of Ukraine’s gas supply, have combined to send stock markets down across the board today.
European markets are all in the red, while the Dubai middle east market lost over 3% today after the Isis militant group made further gains – capturing the city of Tal Afar.
"All of these remarks do suggest the tide is turning at the Bank of England
Whether that means that a hike by the end of this year is on the cards, we are not sure. But these minutes may go some way to showing us."
The worries of the previous week, namely Iraq and higher UK interest rates, are still with….
At the moment there seems little reason to be in equities, a theme that will likely predominate so long as Iraq tensions continue.
1.34pm BST
Quizzes don’t have to be taxing, but in this case…
Think you know more about tax than the average Briton? Take our quiz and find out http://t.co/zj7numFP2d
1.16pm BST
Hungarian airline Wizz Air’s decision to abandon its £160m float on the London stock market (see 8.08am) is a warning to other airlines about the impact of higher oil prices, reckon analysts at ETX Capital.
They say:
Clearly the sharp rise in oil prices is having a significant effect on the airline industry if its stopped Wizz from coming to the market. Fuel is one of the main costs for airlines, particularly for discount carriers.
All of Wizz’s low-cost competitors, Ryanair, EasyJet and Norweigan Air Shuttle have seen drops over past two weeks, with the violence in Iraq increasing pressure on the sector.
12.48pm BST
Over in Parliament, French economist Thomas ‘inequality’ Piketty is being interviewed by Stewart Wood, the shadow Cabinet Office minister, about his book "Capital in the 21st Century".
Our politics liveblogger, Andrew Sparrow, is covering it all here:
Jane Austen portrayed an rg world it was self evident and barely remarked upon says Piketty #pikettyclass
I wish more economists could talk interestingly about Jane Austen what a wonderful world it would be #pikettyclass
@stefanstern it is a truth universally acknowledged that a multi variable regression returning r-squared < .9 must be in want of remodelling
12.24pm BST
Germany’s central bank has predicted that growth slowed in the last three months, but still expects to outperform the eurozone average later this year.
In its monthly report, the Bundesbank predicted that Germany will only enjoy "muted" growth in the April-June quarter. That’s a sharp slowdown on the 0.8% expansion recorded in the first quarter — four times faster than the euro area as a whole.
11.55am BST
Gazprom’s decision to turn off Ukraine’s gas supply this morning won’t have gone unnoticed in Lithuania, Estonia, Finland and Latvia, who are all fully reliant on Russian gas.
And as The Economist shows, another nine countries take more than half their gas from Russia:
The ICE July natural gas contract rose 6.2 per cent to 44.45p a therm, on fears a third "gas war" between the two countries in eight years could threaten supplies to Europe. An equivalent Dutch contract was up 4.5 per cent.
11.40am BST
Northern Ireland’s economy has received a fillip this morning, with a Belfast based missile manufacturer signing an order worth £48 million to build a new defence system for Royal Navy helicopters.
Thales, which has its headquarters in the east of the city, will make a new generation of missiles aimed at countering the threat from small ships and fast attack craft.
The Future Anti-Surface Guided Weapon system will be fitted to naval helicopters.
11.21am BST
Middle Eastern markets have, understandably, seen the biggest declines this morning.
Dubai’s general index is the biggest faller, down 3% to its lowest level since last March, with many companies shedding almost 10%.
"Reports that Iraq has entered a full blown sectarian conflict is ensuring a thread of anxiety is running through markets."
10.39am BST
Another way of looking at Europe’s slowing inflation rate…
Weak inflation remains widespread in #euro area. #Eurostat reports 14 of 18 countries with CPI under 1%. #lowflation pic.twitter.com/tKtvzV0qov
10.35am BST
Back in the UK, the City watchdog has fined Credit Suisse International and Yorkshire Building Society for misleading small investors.
The Financial Conduct slapped CSI with a £2.39m fine, and Yorkshire with a £1.4m fine, over an investment product which exaggerated how profitable it could be.
The Cliquet Product was designed by CSI to provide capital protection and a guaranteed minimum return with the apparent potential for significantly more if the FTSE 100 performed consistently well.
The probability of achieving only the minimum return was 40-50% and the probability of achieving the maximum return was close to 0%. Despite this CSIs and YBSs financial promotions marketed the potential maximum return on the product as a key promotional feature.
Credit Suisse and Yorkshire Building Society fined for financial promotions failures: http://t.co/9O6hU9FPbt
10.20am BST
We have confirmation that the eurozone slipped deeper into a low-inflation quagmire in May.
Eurostat reports that prices rose by just 0.5% across the euro region last month, in line with its initial estimate.
Eurozone CPI (May) F comes in at 0.5% exp: 0.5% #euro
10.06am BST
European stock markets have edged lower this morning, although the reaction to events in Iraq and Ukraine is pretty muted.
There had been speculation that US rival Medtronic could be interested in a takeover of the UK hip and knee implant specialist.
But Medtronic has now agreed to buy Dublin-based Covidien for $42.9bn and relocate to Ireland for a lower tax rate.
10.02am BST
Another prediction that UK interest rates will rise before readers have dragged the Christmas decorations out of the loft:
Credit Suisse brings fwd rate hike forecast from Feb 2015 to Nov 2014.
9.40am BST
In other energy news, Russia’s Gazprom cut off the gas supply to Ukraine this morning as the deadline for Kiev to meet its energy bill expired.
Europe’s energy commissioner is hoping that a compromise can be reached; with Gazprom’s chief executive due to meet with President Putin later today. Gas should still be flowing through Ukraine to Europe.
9.31am BST
A sign of the times? Majestic Wine, the high street wine merchant, has reported that like-for-like sales dipped slightly last year as households cut back.
But customers prepared to pay £20 or more for a bottle don’t appear to be feeling the pinch; sales of "fine wine" increased by almost a fifth.
9.06am BST
Outgoing Bank of England deputy governor Charlie Bean has also helped drive the pound up over $1.70 today, and to a new 18-month high against the euro.
Bean reinforced speculation that borrowing cost will rise soon, by telling the Sunday Times that he would welcome a rate rise.
"…a symbolic step, because it will be an indication that we are on the road back to normality.
Some complacency has entered these markets in recent months and the Bank of England has simply dug people in the ribs overnight to re-affirm that this will not last forever.
Whether Carney is sick of playing Mr. Nice Guy all kitted out with painful football analogies and pop culture references or believes that the dynamics of the housing market need changing is up for debate.
8.46am BST
The pound has now dipped back below the $1.70 mark, after that early morning surge.
It remains close to its highest level since the summer of 2009, with traders reckoning interest rates could well rise before Christmas.
Briefly this morning the UK Pound £ pushed above US $1.70 as the post Carney Mansion House speech surge continues #BoE #CurrencyWars
8.37am BST
With the oil price hovering around a nine-month high, there is lots of chatter about the impact that the Iraq crisis will have on the global economy.
Tony Nunan, oil risk manager at Mitsubishi Corp in Tokyo, predicts prices will remain higher for some time.
"It looks like the country is headed to civil war, which will mean a higher risk premium built into oil prices.
This may not mean a stop to Iraqi exports immediately, but it probably will affect Iraq’s ability to increase its production rate."
Investors aren’t expecting material costs will rise soon and have an immediate impact on companies’ profits, but they are wary of these risks in the longer run," said Hikaru Sato, a senior technical analyst at Daiwa Securities.
"The geopolitical concerns are lowering risk appetite."
8.16am BST
Over in Greece, cleaning workers who lost their jobs last summer are reported to have massed at the finance ministry.
They are demanding a meeting with the country’s new finance minister, Gikas Hardouvelis, to press their case to be reinstated – having been laid off in Greece’s austerity cutbacks.
Protesting (for months and everyday) cleaners have circled FinMin and asking to see the minister. v @dromografos pic.twitter.com/bsAFg7ILjh
8.08am BST
Hungarian airline Wizz Air has abandoned its plans to float on the London stock market – blaming "the current market volatility in the airline sector".
Wizz Air had hoped to raise 200m to help fund its expansion plans. The sight of recent profit warnings from Lufthansa and Aer Lingus – and the rise in the oil price – appear to have forced a rethink.
7.56am BST
Growing expectations that UK interest rates will rise within the year have just driven the pound to its highest level in nearly five years.
The pound hit $1.70 mark in early trading in London.
Pound Strengthens above 1.70: http://t.co/IGcC7HMxe4
Pound Strengthens Above $1.70 for First Time Since August 2009 ! The Football team may not be breaking delf but hey currency is !
7.55am BST
Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and the eurozone.
Geopolitical fears continues to dominate the markets, after a weekend of heavy fighting in Iraq which saw Sunni insurgents capture the town of Tal Afar in northwest of the country, strengthening their hold.
The crisis in Iraq is lending continued support to the oil price and holding back Asian equities, which are generally lower despite pockets of strength in the technology sector; airlines are among the weaker groups. European futures are generally lower.
The yen is firming on safe-haven attractions.
Further #Iraq insurgent gains. Could be unifying moment if political factions unite to fight ISIS, but fragmentation of country now possible
Concerns still focus on Iraq with T-notes, WTI and gold all higher coming into the EU open