European manufacturers getting more positive amid lower euro

LONDON (AP) — Enjoying the bonus offered by the much lower euro, manufacturers across much of the 19-country eurozone are hiring again. Greece’s manufacturers though don’t appear to be enjoying the fruits offered by a lower currency amid worries over the country’s economic future.

In a closely monitored survey, financial information company Markit said Wednesday the region’s manufacturers raised employment levels in March at the fastest rate for over three-and-a-half years.

The reason appears clear enough — the sharp fall in the value of the euro currency over the past few months has made exports emanating from the region much more competitive. That’s evident in Markit’s survey, which found incoming new business at its highest level since last April.

As a result, Markit’s purchasing managers’ index — a broad gauge of business activity — for the eurozone’s manufacturing sector rose to 52.2 in March from 51.0 the previous month. Anything above 50 indicates expansion.

The so-called PMI now stands at a 10-month high, the latest in a string of indicators to point to a step-change in the eurozone’s economic recovery.

Markit found growth accelerated across the eurozone, not just Germany, where car makers such as Daimler are already benefiting. Spain and Italy, two countries at the forefront of the region’s debt crisis over the past few years, were highlighted.

“Producers are benefiting from the weaker euro, which has had the dual effect of boosting competitiveness in export markets as well as making competing imports more expensive in the home markets,” said Chris Williamson, Markit’s chief economist.

“The fact that manufacturers are boosting their payroll numbers at the fastest rate for three-and-a-half years indicates optimism that the upturn will be sustained in coming months,” he added.

In recent months, the euro has notched up one milestone after another as it dropped against major currencies. Last month, it hit a 12-year low against the dollar around the $ 1.05 mark. It’s now trading a little higher than that at $ 1.0750.

The fall in Europe’s single currency has been dramatic — as recently as May, it was trading just shy of $ 1.40 and many firms across Europe openly fretted about the impact on their exports.

One country seemingly not benefiting from the falling euro has been Greece, whose economy has been hobbled by the ongoing uncertainty surrounding the country’s bailout.

Discussions between the new Greek government and the country’s creditors over an economic reform plan have dragged. An agreement between the two is needed if Greece is going to get its hands on the next batch of bailout cash — more than 7 billion euros — that it needs to avoid going bankrupt and potentially exiting the euro. And even if an agreement is reached, Greece will still most likely need financial assistance beyond the summer.

That uncertainty has unsurprisingly prompted a cautious approach among those looking to do business with Greek firms. Markit found the Greek manufacturing sector contracting for the third month running in March mainly linked to a further reduction in incoming new work in the sector, in particular from abroad.

“One major concern is the trend in exports, which up until fairly recently had been acting as a support to the sector but are now an area of weakness as uncertainty deters foreign clients,” said Phil Smith, an economist at Markit.

As a result, he said manufacturers are scaling back production, meaning the sector is dragging down the wider economic recovery, which took root last year after a brutal six-year recession saw Greek economic output shrink by a quarter and unemployment and poverty levels swell alarmingly.

Many economists expect Greece to be officially back in recession when first quarter numbers are published next month.

FOREX-Euro hurt by Greek uncertainty, dollar helped by rate outlook

* Dollar firmer vs yen and euro

* Euro weighed down by uncertainty over Greece

* Yellen’s message on gradual tightening provides no fresh impetus (Recasts, fresh quotes, updates prices)

By Anirban Nag

LONDON, March 30 (Reuters) – The euro fell on Monday, hurt by uncertainty over whether Greece and its international creditors will be able to strike a deal that will help Athens secure funding before it runs out of money by April 20.

Talks continued through the weekend on reforms to unlock loans and Athens sounded an upbeat tone, but the lenders said it could take several more days before a proper list of measures was ready.

The dollar rose broadly, helped by comments from Federal Reserve chair Janet Yellen, who underscored the view that the Fed is likely to start raising interest rates gradually later this year.

The dollar edged up 0.3 percent to 119.50 yen, while the euro fell 0.6 percent to $ 1.0830, having in the last two weeks pulled away from a 12-year trough of $ 1.0457.

“Even though euro short positions are at record highs, given the Greek uncertainty and the bias for more monetary injection by the European Central Bank, the path for least resistance is a lower euro/dollar,” said Jeremy Stretch, head of currency strategy at CIBC World Markets.

“Unless the euro drops below $ 1.0770 we could see ranged trading, but with the Fed still looking to raise rates, we could see conditions later this week that are more helpful for overall dollar strength.”

U.S. jobs data on Friday will be a key event for the dollar this week and a robust report could see investors position for tighter monetary policy sooner rather than later.

In a speech on Friday, Yellen outlined the case for a ‘gradualist approach’ to rate hikes, in comments mirroring those at the post-FOMC meeting on March 18. She signalled the Fed will likely start raising borrowing costs later this year but said policy tightening could “speed up, slow down, pause, or even reverse course” depending on actual and expected developments in the economy.

“Yellen went to great length to detail why rate hikes would not be rushed and ultimately may not reach levels previously considered to be ‘normal’,” said Ray Attrill, global co-head of FX strategy at National Australia Bank.

“Our take is that while rates may rise sooner and faster than current market pricing, they are more likely to undershoot than overshoot the Fed’s latest median ‘dot point’ trajectory.”

Still, the diverging rate pathways between the Fed and most of the developed world meant the dollar should stay supported.

“Our view of the U.S. dollar remains broadly positive and we have always viewed that the correction of the past two weeks in the U.S. dollar is temporary,” said Heng Koon How, senior FX strategist for private banking and wealth management at Credit Suisse in Singapore.

(Additional reporting by Masayuki Kitano; Editing by Susan Fenton)

‘Perfect storm’ could send euro lower

“A perfect political and economic storm is brewing,” said BBH currency strategists led by Marc Chandler in a research note published Monday.

Despite the small bounce in the euro after the results were out, Societe Generale’s Kit Juckes said the currency could continue to decline against the dollar this week. He predicted the euro could move to, or through, $ 1.20, taking it to lows last seen at the apex of the euro zone debt crisis in 2010.

“The failure (of Monday’s vote in Greece) was widely expected, so the immediate response is minimal, despite Greek yields being higher and Greek stocks having failed to bounce,” the macro strategist told CNBC via email.

“I think if the euro starts to fall, it could gather some downward momentum, given the uncertainty about the outcome of the elections.”

Read MoreGreek stocks tank as snap election called

'Perfect storm' could send euro even lower

“A perfect political and economic storm is brewing,” said BBH currency strategists led by Marc Chandler in a research note published Monday.

Despite the small bounce in the euro after the results were out, Societe Generale’s Kit Juckes said the currency could continue to decline against the dollar this week. He predicted the euro could move to, or through, $ 1.20, taking it to lows last seen at the apex of the euro zone debt crisis in 2010.

“The failure (of Monday’s vote in Greece) was widely expected, so the immediate response is minimal, despite Greek yields being higher and Greek stocks having failed to bounce,” the macro strategist told CNBC via email.

“I think if the euro starts to fall, it could gather some downward momentum, given the uncertainty about the outcome of the elections.”

Read MoreGreek stocks tank as snap election called

GLOBAL MARKETS-Euro wobbles before Athens vote, Greek shares tumble

* Asian shares tick up after Fresh highs on Wall Street

* Euro wallows near 28-mth lows before Greek parliamentary vote

* Greek shares drop almost 8 percent

* AirAsia posts biggest drop in 3 yrs after aircraft goes missing

* Oil rebounds on renewed tensions in Libya

By Marc Jones

LONDON, Dec 29 (Reuters) – Europe’s financial markets returned from their Christmas break in a cautious mood on Monday, as Greece’s parliament prepared for a final round of presidential voting, which if unsuccessful, will fuel worries about its future in the euro.

A result is expected around 1100 GMT. Should Greek Prime Minister Antonis Samaras fail to get enough support for his nominee, Stavros Dimas, he will have to call snap elections for late January or early February, which polls suggest the anti-EU/IMF bailout Syriza party would win.

European shares reflected the uncertainty as stocks in Athens plunged almost 8 percent in early trading and the euro nudged back towards a more than two-year low against the dollar.

Syriza is set on writing off much of Greece’s debt and reversing years of austerity just as the economy returns to growth, a stance that could see Athens shut out of the markets.

“It really feels too close to call now,” said UniCredit interest rate strategist Luca Cazzulani.

“If they manage to elect a president, investors will start putting on risk over the coming days and we will start to talk about a different set of topics in the new year. If they fail, then uncertainty will be with us for some weeks at least.”

Away from Athens, trading was thin.

The rouble’s recent rebound ran out of steam , but Asian stocks had risen overnight following fresh gains for the record-high Wall Street last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1 percent with Australian shares and Hong Kong up 1.5 and 1.8 percent respectively.

Tokyo’s Nikkei bucked the trend and slid 1 percent as reports of a suspected Ebola case in Japan spooked a market still on track for about an 8 percent gain on the year.

In Malaysia, shares in AirAsia posted their biggest one-day drop in more than three years after one of its aircraft went missing on its way to Singapore from Indonesia.

BAILOUT BARTER

Greek government bonds lost ground ahead of parliament’s vote. Former European Commissioner Dimas, the candidate of the ruling coalition, needs 180 votes to become president having got just 168 in the last round.

The euro was last at $ 1.2183, not far from its lowest since August 2012, at $ 1.2165, which was hit the previous week.

The dollar stood firm at 120.200 yen, remaining in sight of a 7-1/2 year high of 121.86 hit earlier in the month, but lacking enough momentum to challenge that peak. This year, the greenback has risen roughly 15 percent against the yen.

On the 2015 outlook for risk assets, investors will be concerned about whether the robustness of the U.S. economy will be able to offset signs of slowdown in powerhouse China and the euro zone.

There is also uncertainty about the impact of the 45 percent drop in oil prices over the last six months on many of the larger producers that depend on the revenues.

After two days of falls, oil prices rose as escalating clashes in Libya stoked worries about supply.

A fire caused by fighting at a main export terminals has destroyed 800,000 barrels of crude – more than two days of Libya’s output – officials said, amid clashes between factions battling for control of the nation.

“Libya, and all the other problems, warrants some kind of risk premium,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

(Additional reporting by John Geddie in London and Keith Wallis in Singapore; Editing by Dominic Evans)

Euro wobbles before Athens vote, Greek shares tumble

By Marc Jones

LONDON (Reuters) – Europe’s financial markets returned from their Christmas break in a cautious mood on Monday, as Greece’s parliament prepared for a final round of presidential voting, which if unsuccessful, will fuel worries about its future in the euro.

A result is expected around 6:00 a.m. EST. Should Greek Prime Minister Antonis Samaras fail to get enough support for his nominee, Stavros Dimas, he will have to call snap elections for late January or early February, which polls suggest the anti-EU/IMF bailout Syriza party would win.

European shares reflected the uncertainty as stocks in Athens plunged almost 8 percent in early trading and the euro nudged back towards a more than two-year low against the dollar. [FRX/]

Syriza is set on writing off much of Greece’s debt and reversing years of austerity just as the economy returns to growth, a stance that could see Athens shut out of the markets.

“It really feels too close to call now,” said UniCredit interest rate strategist Luca Cazzulani.

“If they manage to elect a president, investors will start putting on risk over the coming days and we will start to talk about a different set of topics in the new year. If they fail, then uncertainty will be with us for some weeks at least.”

Away from Athens, trading was thin.

The ruble’s recent rebound ran out of steam, but Asian stocks had risen overnight following fresh gains for the record-high Wall Street last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1 percent with Australian shares and Hong Kong up 1.5 and 1.8 percent respectively.

Tokyo’s Nikkei bucked the trend and slid 1 percent as reports of a suspected Ebola case in Japan spooked a market still on track for about an 8 percent gain on the year.

In Malaysia, shares in AirAsia posted their biggest one-day drop in more than three years after one of its aircraft went missing on its way to Singapore from Indonesia.

BAILOUT BARTER

Greek government bonds lost ground ahead of parliament’s vote. Former European Commissioner Dimas, the candidate of the ruling coalition, needs 180 votes to become president having got just 168 in the last round.

The euro was last at $ 1.2183, not far from its lowest since August 2012, at $ 1.2165, which was hit the previous week.

The dollar stood firm at 120.200 yen, remaining in sight of a 7-1/2 year high of 121.86 hit earlier in the month, but lacking enough momentum to challenge that peak. This year, the greenback has risen roughly 15 percent against the yen.

On the 2015 outlook for risk assets, investors will be concerned about whether the robustness of the U.S. economy will be able to offset signs of slowdown in powerhouse China and the euro zone.

There is also uncertainty about the impact of the 45 percent drop in oil prices over the last six months on many of the larger producers that depend on the revenues.

After two days of falls, oil prices rose as escalating clashes in Libya stoked worries about supply.[O/R]

A fire caused by fighting at a main export terminals has destroyed 800,000 barrels of crude – more than two days of Libya’s output – officials said, amid clashes between factions battling for control of the nation.

“Libya, and all the other problems, warrants some kind of risk premium,” said Jonathan Barratt, chief investment officer at Sydney’s Ayers Alliance.

(Additional reporting by John Geddie in London and Keith Wallis in Singapore; Editing by Dominic Evans)

Sterling firms as focus turns to UK fundamentals, rate outlook

LONDON, Sept 22 (Reuters) – Sterling rose on Monday, inching back towards recent two-year highs against the euro and moving higher against the dollar as investors focused on Britain’s economic fundamentals and interest rate expectations after Scotland’s independence vote.

The euro traded 0.2 percent lower against sterling at 78.64 pence, not far off a two-year low of 78.10 struck on Friday amid relief over the Scots’ decision in a referendum to reject independence and to stay inside the United Kingdom.

The pound rose 0.35 percent against the dollar to trade at $ 1.6340, with the greenback coming under some pressure after it posted its 10th straight week of gains on Friday.

“We continue to see further upside to sterling this week as the currency should now return back to fundamental drivers, with the UK data obtaining more prominence again,” said Petr Krpata, currency strategist at ING.

“We still think that the pound has to do some more catching up following last week’s back-to-normal correction in short-end UK yields.”

He added that the UK two-year bond yield was not far from its July highs and a break above that levels would take it to its highest in over three years, giving sterling a boost.

With the uncertainty over the Scottish referendum out of the way, investors judged that one more obstacle to an interest rate hike from the Bank of England was cleared for the time being.

Sterling overnight interbank average rates are pricing in the chance of a first rate increase by the BoE in the spring of 2015. Analysts said sterling stood to gain more against the euro and yen since both the European Central Bank and the Bank of Japan are likely to stick with an ultra-loose monetary policy.

The U.S. Federal Reserve reiterated last week that, while near zero rates would be maintained for a considerable time, rate hikes could come at a faster rate next year and in 2016. The Fed nudged up its expected path of interest rate increases – or Fed dots – boosting yields on U.S. notes, and hence the appeal of the dollar.

And although the dollar gave back some of its gains on Monday, traders said the pound’s rebound against the greenback would be capped. They said uncertainty over future constitutional changes in the United Kingdom following the Scottish referendum could weigh on investment flows.

“We expect sterling/dollar rebounds to remain limited, keeping the downtrend intact,” Morgan Stanley said in a note.

“Political uncertainty is set to remain as the general election approaches next year and there is a constitutional debate regarding providing more powers to Scotland in combination with changes to English MPs only voting on English issues,” Morgan Stanley said in a note.

(Reporting by Anirban Nag; Editing by Gareth Jones)

Asia shares mostly up after Yellen speech

Asian markets mostly rose Monday, while the dollar hit multi-month highs against the yen and euro after the US Federal Reserve chief seemed to indicate a shift towards an interest rate rise sooner than expected.

While Janet Yellen’s speech Friday said slackness in the jobs market would likely staunch inflation, investors noted her acknowledgement of calls for an early rate rise. Analysts said this may suggest she is thinking of such a move.

Tokyo climbed 0.28 percent, or 74.06 points, to 15,613.25 and Seoul put on 0.20 percent, or 4.19 points, to end at 2,060.89. Hong Kong gained 0.22 percent, or 54.68 points, to close at 25,166.91.

However, Sydney shed 0.19 percent, or 10.7 points, to 5,634.9 and Shanghai dipped 0.51 percent, or 11.54 points, to 2,229.27.

Speaking at the Fed’s annual symposium in Jackson Hole, Wyoming, Yellen said even if unemployment has fallen more quickly than expected to 6.2 percent, there remains “considerable uncertainty about the level of employment”.

That signalled her commitment to the Fed’s timetable for raising rates late next year, rather than earlier as some analysts and policymakers would like.

However, Junichi Ishikawa, market analyst at IG Securities in Tokyo, told Dow Jones Newswires: “Her comments at Jackson Hole were balanced, and took into consideration the positions of the more hawkish members of the Fed.”

And Kathleen Brooks at Forex.com said dealers took account of the uncertainty surrounding labour market indicators which Yellen mentioned in her speech. “The market seems to perceive this indecision to be a subtle shift away from the ultra-dovish stance Yellen has taken in the past,” she said.

Yellen’s comments pushed the dollar above 104 yen for the first time since April and to the strongest level since January.

In afternoon Tokyo trade the greenback bought 104.10 yen compared with 103.87 yen in New York Friday.

The Dow eased 0.22 percent Friday and the S&P 500 shed 0.20 percent. The Nasdaq added 0.14 percent.

The euro was at $ 1.3190 — just shy of an 11-month low against the dollar — and 137.27 yen, against $ 1.3241 and 137.60 yen.

On oil markets, US benchmark West Texas Intermediate for October eased 11 cents to $ 93.54 while Brent crude for October tumbled 14 cents to $ 102.15.

Gold traded at $ 1,276.97 an ounce at 0810 GMT compared to $ 1,281.40 an ounce late Friday.

In other markets:

— Taipei edged up 0.11 percent, or 10.52 points, to 9,390.62.

Taiwan Semiconductor Manufacturing Co was 0.4 percent lower at Tw$ 125.0, while Hon Hai Precision was up 0.45 percent at Tw$ 110.5.

— Wellington rose 0.30 percent, or 15.75 points, to 5,182.74.

Air New Zealand was up 1.41 percent at NZ$ 2.16 and Trade Me rose 1.09 percent to NZ$ 3.72.

— Manila was closed for a public holiday.

Slowdown in Europe leads to calls for ECB action

The European Central Bank (ECB) faces fresh calls to adopt growth-boosting measures after data out yesterday showed growth in the euro zone has stalled.

Economic growth in the second quarter was flat compared to the first quarter, Eurostat figures showed yesterday, combined with a drop in euro zone inflation.

Slowdowns in Germany, France and Italy – the euro area big three, comprising two-thirds of euro zone GDP – dragged down the overall growth figure from 0.9 per cent in the first quarter to 0.7 per cent in the quarter to the end of June.

Growth in Germany, the EU’s largest economy, contracted by 0.2 per cent while the French economy saw no growth at all over the same period. Italy, the euro zone’s third largest economy, has already entered recession.

Eurostat data shows the euro area’s inflation rate dropped to 0.4 per cent in July, its lowest rate since 2009 and well below the ECB’s inflation target of 2 per cent, or just below.

Fears over euro zone economic prospects saw interest rates on German sovereign debt, a safe haven for investors in uncertain times, drop for a time yesterday to a record low of less than 1 per cent.

The cost of borrowing fell across the euro zone, with 10-year yields in Belgium and Ireland falling to record lows.

Yesterday’s data added to European economic uncertainty caused by the EU stand-off with Russia over Ukraine. Last week Moscow imposed sanctions on European food imports in retaliation to EU economic sanctions against Russia.

Weakness in the euro zone core followed mixed results in the bloc’s crisis countries. After Portugal posted a 0.6 per cent contraction in the first quarter it grew by 0.6 per cent in the quarter to the end of July. Spain also continued to recover with 0.6 per cent rise in gross domestic product (GDP). However the economies in both Greece and Cyprus have continued to contract.

The European Commission said the Eurostat data underlined the importance of pressing ahead with structural reforms. “The ongoing adjustment in the euro area today is a story of a deep structural change,” said a commission spokesman. “External developments may increase uncertainty, but foundations remain intact.”

However France was quick to disagree, saying the weak data showed the need for a rethink of euro area economic policy.

“We must adapt the pace of deficit reduction to the exceptional situation . . . of growth that is too weak everywhere in Europe and the exceptional situation of inflation that is too weak across Europe,” said Michel Sapin, French finance minister, on French radio.

In an article in Le Monde, he urged the ECB to act against the threat of deflation and reduce the euro’s exchange rate.

Analysts said uncertainty over the euro area’s economic outlook would increase pressure on the ECB for greater intervention to boost growth.

Chris Williamson, economist at Markit, said stalling economic growth “raises concerns that the euro area is sliding back into a triple-dip recession”.

The weak euro zone data contrasts with positive numbers from the UK and US, while Irish economic forecasts remain positive.

A report from Davy Research on Wednesday predicted the Irish economy will grow by 3.5 per cent this year and by 3 per cent in 2015. It said short-term indicators suggested Ireland was Europe’s fastest growing economy.

SNB Sees Continued Demand for Safe Haven in an Uncertain World

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For the Swiss National Bank, the world is still perceived by investors to be such a dangerous place that demand for the franc as a safe haven risks damaging the nation’s exporters.

The Swiss central bank imposed s CHF1.20 per-euro exchange-rate floor in September 2011 to prevent the Swiss economy slipping into recession and to head off the threat of deflation. The currency had surged to near parity with the euro, driven by investor demand for a safe haven from the euro region’s debt crisis.

But even as the euro zone has begun to recover from that crisis, other sources of turbulence have emerged, most recently in the form of tensions between the U.S. and the European Union on one side, and Russia on the other following the latter’s takeover of Ukraine’s Crimea peninsula.

“The international environment is still giving rise to high levels of uncertainty, and so the danger that the Swiss franc, as a safe haven, might suddenly be subject to further upward pressure hasn’t been averted,” SNB President Thomas Jordan said, in comments prepared for delivery at the SNB’s annual general meeting.

The SNB cut interest rates to near zero a month before introducing its minimum exchange rate, and has repeatedly stressed this policy is likely to remain in place for some time.   The Zurich-based central bank last month kept interest rates on hold and again pledged to defend the franc/euro floor with all means at its disposal.

However, Mr. Jordan stressed the minimum exchange rate doesn’t represent a peg to the euro.

“The franc is able to move freely above CHF1.20 per euro, but it is high, and should weaken with time,” he said.

Turning to the economic environment in Europe, Mr. Jordan said the debt crisis there had become less virulent, but it has still not been fully overcome.

“Moreover additional uncertainties have emerged, and overall the environment remains extremely challenging for both the Swiss economy and our monetary policy,” he said.

By contrast, the Swiss economy performed relatively well last year, and the gradual upswing in the global economy should support Swiss exports going forward. But the backing for tighter immigration controls on European Union workers in Switzerland has added an element of uncertainty to the outlook for the Swiss economy, although it cannot yet be quantified, Mr. Jordan said.

Switzerland’s sound finances and economic growth compare favorably with those of the EU, the main market for Swiss goods. The Alpine country’s economy is expected to expand 2.2% this year, according to its department of economics. The SNB also sees growth of around 2% in 2014.