Services sector boasts further growth

Ireland’s services sector expanded during March, as companies operating in the sector continue to benefit from a recovering economy. However, the sharp fall in the value of the euro during the month contributed to a significant rise in input costs.

According to the latest Services Purchasing Managers’ Index from Investec, March saw further growth in new orders, as the headline PMI reading of 60.9 demonstrates “clear and consistent strong growth”, bringing the current sequence of expansion to 32 consecutive months.

Philip O’Sullivan, chief economist, Investec Ireland, said that the latest survey reveals further expansion of activity in March.

“While the rate of growth implied by the headline PMI moderated for a third successive month to 60.9 (from 61.4 in February), it is consistent with a sharp rate of expansion, with the sequence of above-50 readings now extending to 32 successive months,” he said.

Irish services companies benefited from healthy demand from both domestic and overseas customers, according to Investec, with the New Orders index still well above the series average.

Employment across the services sector continues to be broad-based, Mr O’Sullivan said, with data for the four segments of the services industry – TMT, business services, financial services and travel & leisure -reporting simultaneous growth in headcounts for a sixteenth successive month.

However, the survey also revealed that the impact of the European Central Bank’s quantitative easing programme, aimed at stimulating growth in the euro zone, is somewhat of a double-edged sword. The fall in the value of the euro against Ireland’s largest trading partner, the UK, contributed to a sharp rise in input costs in March, but new orders also grew at a substantial pace with new business from abroad, in particular from the UK.

Looking ahead, Mr O’Sullivan noted that, despite recent slippage, the expectations index remains well above the series average, signalling that services firms remain upbeat on their prospects.

“A tangible sign of this is the ongoing rise in payrolls in the sector. Given these factors, we are confident that further encouraging Services PMI readings will be posted in the coming months.”

Meanwhile, euro zone business activity accelerated in March at its fastest pace for nearly a year as customers took advantage of ongoing price discounting to place new orders at a rate not seen since mid-2011, a survey found.

The upbeat survey will provide welcome news for the European Central Bank just weeks after it embarked on a trillion- euro asset-purchase programme to try and spur growth and inflation.

Markit’s final March Composite PMI, seen as a good indicator of growth, stood at 54.0, a touch below the preliminary estimate of 54.1 but well ahead of February’s 53.3. A reading above 50 implies growth.

“The PMIs are indicating somewhat sluggish GDP growth of 0.3 per cent for the first quarter. However, the important message from the survey data is that the pace of expansion looks set to gather pace in coming months,” said Chris Williamson, Markit’s chief economist.

A sub-index measuring new orders leapt to 54.1 from 52.5, its highest since May 2011. That suggests a healthier outlook although the survey also showed companies have now been cutting prices for three years, although not as sharply in March.

Euro zone deflation eases, unemployment drops

Deflation in the euro zone persisted in March but the rate of decline slowed, further easing concerns that the economy faces a dangerous spiral of falling consumer prices.

Prices in the 19-nation euro zone were down 0.1% in March, less than the drop of 0.3% in February with low energy costs still impacting the cost of living, the EU statistics agency Eurostat said.

Prices had slumped 0.6% in January.

As in previous months, the decline was mainly driven by a steep fall in the prices of energy, which was 5.8% cheaper in March than a year earlier.

Core inflation, which excludes the volatile components of energy and unprocessed food costs, was 0.6% year-on-year, down from 0.7% in February and the same as in January.

The bottoming out of price falls is likely to be welcome news for the European Central Bank, which wants to keep inflation below, but close to 2% over the medium term.

It started printing money in March to inject more cash into the economy and make prices rise again.

Meanwhile, in another positive sign for the euro zone economy, Eurostat said euro zone unemployment fell to 11.3% of the workforce in February from an upwardly revised 11.4% in January – the lowest rate since May 2012.

Eurostat said there were 18.204 million people without jobs in the euro zone in February, 49,000 people fewer than a month earlier.

On Monday, Fitch ratings agency said a renewed euro zone debt crisis was the biggest risk to the global economy, even greater than unstable oil prices and despite the ECB’s quantitative easing programme.

Joblessness remained hugely varied across the 19 nation euro zone, with a record low in Germany and alarmingly high levels persisting in Spain, at 23.2%, and 26% in crisis-hit Greece, the highest rate in Europe.

Youth unemployment in Greece stood at a huge 51.2% and 50.7% in Spain.

The data for Italy, the euro zone’s third biggest economy, remained a worry with unemployment up to a high 12.7% in February and youth unemployment at 42.6%. French unemployment remained flat at 10.6%.

The biggest drops in unemployment were felt in small nations Estonia down to 6.2% from 8.4% a year earlier and Ireland, down to 9.9% from 12.1%.

Across the 28-member EU, unemployment stood at 9.8% in February, down from 9.9% in January and 10.5% a year earlier.

Higher German prices could help spur euro zone inflation

By Michelle Martin

BERLIN (Reuters) – German consumer prices rose in March for the first time this year when harmonised to compare with other European Union countries, and could help spur euro zone inflation.

EU-harmonised consumer prices were up 0.1 percent on the year in Europe’s largest economy after dropping 0.1 percent in February, preliminary data from the Federal Statistics Office showed on Monday.

Some economists said the pickup in German inflation, along with data on Monday showing Spain’s EU-harmonised inflation rate rose to -0.7 percent in March from -1.2 percent in February, would likely give the euro zone figure due to be published on Tuesday a boost.

The German reading was in line with a Reuters forecast. Germany’s non EU-harmonised national consumer price index rose by 0.3 percent on the year with service prices increasing while food and energy prices dropped less sharply than in the previous month.

Christian Schulz, senior economist at Berenberg Bank, said the Spanish and German figures could even help the euro zone break a run of negative inflation figures: “On the basis of these two countries, there is a chance that euro zone inflation could climb out of negative territory in March.”

Still, even if inflation returned in the euro zone it would remain well below the European Central Bank’s target of close to but just below 2 percent over the medium term.

A Reuters poll conducted before Monday’s data was published showed economists expect euro zone consumer prices to fall by 0.1 percent in the single currency bloc in March after dropping by 0.3 percent in February. (ECONEZ)

Jennifer McKeown, economist at Capital Economics, said that because German wage growth has been moderate at a time when the economy still has spare capacity, core inflation is not likely to pick up suddenly, especially while oil is cheap.

“We expect energy prices to continue to exert a heavy drag on the headline rate for the next six months or so, which may see headline inflation dip back into negative territory in the near future. But the drag should ease somewhat later this year.”

(Editing by Noah Barkin and Susan Fenton)

ECB won't cut deposit rate below -0.2 percent – Reuters poll

(Reuters) – The European Central Bank won’t cut its deposit rate below the current -0.2 percent, according to 19 of 21 euro area money market traders polled by Reuters on Monday.

The ECB made the rate negative – effectively charging euro area banks to park money with it – in June and then chopped it further below zero in September.

But the large take-up of targeted long-term ECB loans last week has been widely construed as a sign lending to private businesses is on the rise.

In a separate Reuters survey, economists predicted private lending would show an increase for the first time in nearly three years in data due on Thursday. (ECONEZ)

That survey of 23 traders also predicted the ECB would allot 120.0 billion euros at its weekly operation compared with 142.4 billion euros last week.

Banks are expected to take 20.0 billion euros at the ECB’s three-month tender, down from 22.3 billion euros last time.

(Reporting by Deepti Govind; Polling by Hari Kishan and Siddharth Iyer; editing by John Stonestreet)

Expat rates: fixed savings suffer from base rate doldrums

Banks have been cutting the rates on their euro-denominated accounts

Base rate is now in its seventh year at 0.5pc and shows no sign of rising, making life as difficult as ever for savers.

But at least they can stop worrying that base rate has further to fall. Mark Carney, Governor of the Bank of England, said last week that it would be “extremely foolish” for the bank to cut rates further to try to combat low inflation caused by the fall in oil prices.

However, there is still no sight of a rise in base rate this year experts are pencilling one in for 2016 at the earliest.

As a result, some expat fixed savings rates have dropped. Permanent International ( permanent-bank.com ) has cut rates on its one-, two-, three- and five-year fixed rates as well as reducing rates on its less than one-year deals, but only for euro-denominated accounts. It has also launched new issues of its 15-month and 18-month fixed deals, but at lower rates than before.

The biggest cuts at Permanent affect its two-, three- and five-year fixed rates. It was paying 2.03pc fixed for two years but is now paying 1.69pc. For three years, before March 16 Permanent was paying 2.06pc but for new savers now the rate is 1.67pc. And for five years, Permanent was paying 2.11pc: now the rate is 1.64pc.

Permanent’s euro-denominated fixed rates have all been cut; they now go from 0.2pc fixed for three months on a minimum £100,000 (previously 0.4pc) to 0.79pc fixed for five years (before it was 1.17pc) on £20,000 plus.

The new issues of its 15-month and 18-month fixed deals are 1.6pc and 1.7pc respectively the previous issues paid 1.7pc and 1.85pc.

Santander both its Isle of Man branch ( santander.co.im ) and its Channel Islands-based private bank ( santanderpb.je ) has cut rates on its one- and two-year fixed rates and has withdrawn its three-year fixed rate deal.

Santander was offering 1.1-1.2pc as a one year fixed rate and now is paying 1-1.1pc. The two-year rate was 1.4-1.5pc and is now 1.25-1.35pc. The three-year deal, yet to be replaced, was 1.75-1.8pc. For both deals, the lower rate is paid on £500-£199,999 with Santander’s Isle of Man branch and £50,000-£199,000 with the private bank.

Even after the cuts, the two-year Santander deals are competitive although beaten by the reduced Permanent two-year fixed deal at 1.69pc. The Santander one-year deal of 1-1.1pc is beaten by at least three other providers with the top rate 1.45pc offered by Nationwide International ( nationwideinternational.com ).

These changes make the recently-launched three-year fixed rate of 2.2pc from Skipton International not five years, as mistakenly stated in the previous Expat Rates column look particularly good for those wanting certainty for a longer time period ( skiptoninternational.com ).

Even if base rate starts to go up next year, it is unlikely to climb dramatically, so it is reasonable to expect the Skipton deal to remain competitive in the future.

No early access to the money in the bond is allowed, so do not put your money in unless you will not need to get at it earlier.

• Britannia International has now completed its closure procedure. Last year the Isle of Man based bank announced it was to shut as its parent bank, Co-operative, decided to concentrate on its home market by closing it.

It has now written to the few remaining customers who have not moved their money away telling them their accounts have been closed.

Any remaining balances have been moved into a segregated account scheme, which will become effective on March 17. If you do have money that is now being moved into the segregated account, you need to contact the scheme administrator, Appleby Trust (Isle of Man) Limited, 33-37 Athol Street, Douglas, Isle of Man IM1 1LB.

SNB Record-Low Rate Cemented as Economy Reels From Currency Blow

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Speaking after the central bank maintained its rate on sight deposits at minus 0.75 percent, Jordan also said that the franc remains overvalued and officials are ready to intervene in currency markets if needed. Switzerland was dealt a shock on Jan. 15 when the central bank abandoned its franc ceiling of 1.20 per euro — sending the currency surging — and increased its charge on sight deposits …

Another week, another euro drubbing

The plunge in the euro may be starting to look overstretched, but that’s unlikely to stop traders from pushing the battered single currency even lower this week, analysts warned.

The euro (Unknown: EURBA=) briefly fell to a fresh 12-year low against the dollar Monday, at about $ 1.0457, before recovering a touch. Last week, the currency slid 3.2 percent — its biggest weekly fall since 2011 — as the European Central Bank embarked on a 1-trillion-euro quantitative easing program and talk of a rate rise by the U.S. Federal Reserve this year grew.

“The euro continues to track lower and while it continues to struggle above the $ 1.0600 level, the prospect of a move to parity remains very much a possibility,” Michael Hewson, chief market analyst at CMC Markets, said in a note.

“The move lower continues to get more and more overextended, yet new lows continue to be hit every day.”

Read More Weak euro, ECB stimulus make Europe a solid bet: Wisdom Tree

Market positioning data from the Commodity Futures Trading Commission on Friday showed that long dollar (New York Board of Trade (Futures): =USD) bets, which reflect the view that the greenback will strengthen, rose to their highest level in four weeks in the week ended March 10.

The value of the dollar’s net long position was $ 44.31 billion that week, compared with $ 40.85 billion the week before. It marked the eleventh straight week that long positions on the greenback have been in the $ 40-billion region.

Michael Every, head of financial markets research for Asia-Pacific at Rabobank, told CNBC Asia’s “Squawk Box” that the euro could hit parity, or one-to-one against the dollar, within a matter of trading sessions.

“We’ve seen an incredible swing towards the dollar and away from the euro, and if we do get the removal of the word ‘patience’ from the Fed on Wednesday and weak euro zone data we could get there (parity) in a week,” he said.

Read More It’s all about the Fed, but watch for these flareups

Every was referring to this week’s Federal Reserve meeting and speculation that the central bank could remove the word “patience” from its guidance about the pace at which it will normalize monetary policy. If it does, it could signify that rates could rise this year.

Saktiandi Supaat, head of global FX strategy at Maybank, told CNBC that the euro could test resistance levels of $ 1.02 over the next week, which would imply a further loss of 3 percent from current levels. The euro has tumbled almost 25 percent over the past year.

Some analysts said that even if the Fed does not use the word “patience” this week, it could still signal that a rate rise as early as June may not be on the cards – something that could knock the resurgent dollar and give the euro a lift.

“The euro is oversold at these levels and this is a good week for a bounce. I think the Fed will be cautious and temper expectations for a rate rise in June,” Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York, told CNBC Europe.

“The Fed is the only major central bank looking to tighten and it is hard to do that when most central banks are still easing,” he added. “I think the markets are getting a bit ahead of themselves in terms of dollar strength.”

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imageLONDON: Euro zone bond yields kept falling on Wednesday as the European Central Bank hoovered up government debt across the currency union at a rate matching its trillion-euro commitment over 1-1/2 years.

In the first three days of buying by the ECB and the bloc’s national central banks – collectively known as the Eurosystem – traders said orders were tiny and frequent, allowing smaller trading desks to chip in some bonds and widening the pool.

National central banks from the euro zone’s top-rated countries were more active than those rated lower, and the purchases were spread across all the maturities in the 2-to-30 year eligible segment of the market, traders said.

Traders said Italian and Spanish central banks were more active on Wednesday than in the previous two days, as 30-year borrowing costs in both countries fell below 2 percent for the first time.

Mizuho strategist Peter Chatwell said buying these higher-yielding peripheral bonds was the best way for investors to profit from quantitative easing.

“At some point economic data will improve and core yields should rise, whereas periphery will outperform on the way down and in a sell-off.”

Top-rated German 10-year yields, which set the standard for euro zone borrowing costs, fell 3 bps to a new record low of 0.193 percent. Italian and Spanish equivalents were down 9 bps at 1.13 and 1.10 percent. Most other euro zone bond yields were at or close to record lows.

“In the euro area, all government bond yields are approaching the new effective floor, the European Central Bank’s deposit rate of -0.20 percent,” said Markus Allenspach, head of fixed income research at Julius Baer, referring to the ECB’s rule that it cannot buy bonds yielding less than the deposit rate.

“The downtrend of yields is virulent and will continue.”

The main sellers have been the banks that have accumulated inventories of bonds following recent debt sales by governments. But some overseas investors, mainly from the United States, appeared late on Tuesday and were expected again later on Wednesday.

ECB President Mario Draghi said half of the euro zone bonds were held by overseas investors, who would be more likely to sell than the locals, who need to keep hold of the bonds for regulatory reasons.

Traders said the average size of the orders was 15-20 million euros, less than half of that seen at the height of the euro zone debt crisis during the ECB’s first bond-buying scheme, the Securities Markets Programme (SMP).

SCARCITY

ECB policymaker Benoit Coeure said the Eurosystem bought 3.2 billion euros of government bonds on Monday.

“After two days of Eurosystem purchases, it appears that the amounts are close to what we would expect on a daily basis if the ECB is targeting 60 billion euros on a monthly basis, after a slow start early Monday,” Societe Generale strategists said in a note.

“We wouldn’t be surprised if next Monday the Eurosystem has managed to buy 10 billion in cash terms this week,” they said.

Coeure also sought to allay concerns that the ECB would struggle to implement its quantitative easing (QE) programme, saying: “We may face a scarcity of bonds, but we won’t face a shortage.”

That “scarcity” is the main reason why the magnitude of the moves in the bond market took many by surprise.

German 30-year yields fell a further 6 bps on Wednesday to 0.66 percent, below two-year U.S. yields , which were 0.70 percent.

The U.S./German 30-year yield spread has ballooned to 206 bps from 126.6 bps on Jan. 21, the day before the ECB announced its QE plans, according to Reuters data.

“There is an imbalance between demand and supply which keeps pushing yields lower,” BNP Paribas rate strategist Patrick Jacq said.

“That is not surprising. What is surprising is the magnitude of the move. It is a massive, huge move and this is not due to economic fundamentals. This is clearly QE.”

Copyright Reuters, 2015

Business Grows in Euro-Area Top Four Economies as Recovery Firms

(Bloomberg) — Business activity expanded in each of the euro area’s four largest economies for the first time in almost a year, signaling that a fragile recovery is slowly becoming more sustained.

A Purchasing Managers Index for the manufacturing and services industries across the region rose to a seven-month high of 53.3 in February from 52.6 the previous month, London-based Markit Economics said Wednesday. Similar gauges for Germany, France, Italy and Spain were all above the 50-point mark that divides expansion from contraction. The last time that happened was in April 2014.

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Growth in the 19-nation euro economy is set to accelerate this year from a 0.3 percent expansion in the fourth quarter, benefiting from lower oil prices, a weaker euro and the European Central Bank’s 1.1 trillion-euro ($ 1.2 trillion) quantitative-easing plan. A stronger-than anticipated decline in unemployment and a less-than-forecast drop in consumer prices are contributing to improved prospects.

“The outlook has brightened for all countries,” said Chris Williamson, chief economist at Markit. “There were clear signs of the euro-zone economy reviving in February, with stronger inflows of new business and rising business confidence suggesting growth should continue to pick up in March.”

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Economists in Bloomberg’s monthly poll forecast the euro-area economy will expand 0.3 percent in each of the first two quarters of 2015, and 0.4 percent in the following three-month periods through the third quarter of 2016, for annual growth of 1.2 percent this year and 1.6 percent next year.

First Quarter

First-quarter expansions in the region’s largest economies will range from 0.1 percent in Italy to 0.2 percent in France, 0.3 percent in Germany and 0.7 percent in Spain, Markit predicts on the basis of its survey data.

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“With employment rising at the strongest rate for 3 1/2 years, unemployment should fall further from the 11.2 percent rate seen in January,” said Markit’s Williamson. “An easing in the rate at which companies cut their prices meanwhile also suggests that consumer-price deflation will continue to moderate.”

A gauge for the performance of euro-area services rose to 53.7 last month from 52.7, according to the release. On Monday, Markit reported that a similar index for manufacturing stood at 51, unchanged from January.

To contact the reporter on this story: Alessandro Speciale in Frankfurt at [email protected]

To contact the editors responsible for this story: Fergal O’Brien at [email protected]; Jana Randow, Paul Gordon

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