• Demand soars for Spanish short-term debt
• German business confidence better than expected
• Consumer confidence improves slightly in UK, Germany
• Live blogging now: Julia Kollewe
Someone posing as Bank of England governor Sir Mervyn King has just tweeted:
@SirMervynKing Sir Mervyn King
Secret Santa in the office today. Suggested spend of £15. I'm just gift-wrapping a letter explaining why I've failed to match that target.
And a fake Angela Merkel tweeted:
Angela_D_Merkel Angela Merkel
Gave some money to the bank to lend to Nicolas to lend to Christine to lend to Mario to lend to Christine to lend to Lucas. #absurdistan
Have you spotted any other fake Twitter accounts (relating to the financial crisis)?
A reader is asking why we didn't cover the French bond auction yesterday. The answer is: it was an oversight. I don't think we can be accused of "forgetting very often to post 'the bad news'".
But the reader is raising an interesting point. France auctioned €4.5bn of short-term debt at just 0.005% interest yesterday. French newspaper La Tribune reacted by saying: "En cette fin d'année, on prête gratis à la France !" which translates as: "At the end of the year, we're lending to France for free."
If the computer could register negative interest rates, they would be negative, Raoul Salomon, managing director of Barclays France, told the paper.
The auction shows that there is plenty of demand for French short-term debt (2- and 3-month Treasury bills) as banks seek to invest their cash before the end of the year and short-term bonds are seen as less risky. (That's why investors were snapping up Spanish 3 and 6-month bills at another auction today.) Long-term debt is a different matter, where France's top credit rating remains under threat.
Retail sales in the UK unexpectedly rose at their fastest pace since May in the run-up to Christmas as shops slashed prices, a CBI survey for December shows.
The reported sales balance (the difference between retailers saying sales volumes rose and those reporting sales declines) jumped to 9 from -19 in November, wrongfooting analysts who had pencilled in a modest improvement to -13. However, this figure compares with 56 last December.
Judith McKenna, chairwoman of the CBI's distributive trades panel, said:
Early discounting helped retailers add a little extra sparkle to their sales in December, although the reprieve appers to only be temporary.
Consumers are continuing to hold off on purchasing big-ticket items, including durable household goods, to use their hard-earned cash to stock up for Christmas dinner and all-important gifts for the family.
Andy Street, managing director of department store chain John Lewis, said last week that although consumers are feeling the pinch, many are prioritising Christmas spending.
Our Christmas Quiz is up! Check it out here. Who can get all 50 questions right?
The Spanish bond auction has gone very well, bringing some relief to the debt-laden country. Its short-term financing costs fell sharply from last month, with demand for three- and six-month Treasury bills soaring. More than €18bn was offered for €5.6bn sold, above the targeted range of €3.5bn to €4.5bn. The average yield dropped to 2.4% from 5.2% at the previous auction for six-month bills, and to 1.7% from 5.1% for three-month bills.
The European Central Bank will offer eurozone banks loans of up to three years tomorrow to ward off a credit crunch. Bankers were buying Spanish debt ahead of that liquidity supply.
The UK's human capital – the economic value of the knowledge and skills of the working age population – fell by £130bn in 2010, according to the Office for National Statistics.
The knowledge and skills of workers in the UK were worth an estimated £17.12 trillion in 2010. This was more than two-and-a-half times the estimated value of the UK's tangible assets – such as buildings, vehicles, plant and machinery – at the beginning of that year.
The value of the UK's human capital stock increased steadily between 2001 and 2007, averaging annual increases of £425bn. The slowing of earnings growth and increases in unemployment during the economic downturn meant that growth in the stock of human capital slowed to an average of £120bn a year between 2007 and 2009, before falling in 2010.
Rekindling last week's Franco-British war of words, the Sun has reported that Britain will overtake France to become the world's fifth-biggest economy in 2016. A report out later this week from the Centre for Economics and Business Research will outline that French output will shrink by 0.6% in 2012.
The Sun's business editor Steve Hawkes wrote:
And we may even leapfrog our cross-Channel cousins by the end of next year if the euro crisis gets even worse.
CEBR head Douglas McWilliams told The Sun:
Britain's GDP will overtake France's GDP, it's just a question of when.
If the euro doesn't blow up this will happen in 2016, but in a worse-case 'Euro bust' scenario France will fall back dramatically. In this case, France gets overtaken not only by the UK, but also by Brazil by 2015, by Russia in 2016 and by India in 2017.
The CEBR's forecasts come just days after the French tried to deflect growing speculation that France will lose its top credit rating by arguing that Britain's AAA debt rating should be slashed first. Christian Noyer, the head of the French central bank, said that Britain has "a bigger deficit, as much debt, more inflation and weaker growth".
European shares extend gains after the surprise jump in German business confidence. The Dax in Frankfurt is up 21 points, or 0.4%, while the CAC in Paris has risen nearly 20 points, or 0.7%.
The FTSE briefly turned positive but is now trading down nearly 5 points at 5360.
Germany's closely-watched business confidence survey from the Munich-based Ifo institute is better than expected. The main index has climbed to 107.2 in December from 106.6 in November, and compared with economists' forecasts of 106.1. The current conditions and expectations measures have also improved.
The institute's economist Klaus Abberger said Germany seemed to be coping well with the downturn in western Europe. He sees no danger of a recession or credit crunch in Europe's largest economy at present, adding that the Christmas season has gone well for German retailers.
Qatar's royal family and Luxembourg have teamed up to buy Dexia's private banking arm in a deal valuing the business at €730m. It forms part of a wider bailout of the Franco-Belgian bank by the governments of Belgium, France and Luxembourg in October.
Precision Capital, a Qatari investment group, will acquire 90% of the stake, the remaining 10% will be acquired by the Grand Duchy of Luxembourg. Dexia's Banque Internationale specialises in wealth management.
Dexia shares have resumed trading and are down nearly 3% at 32.60 cents.
The FTSE is now down 25 points at 5339, a 0.5% fall. Other European shares have also edged lower: the Dax in Frankfurt has slipped 0.15% while the CAC in Paris has lost 0.27%.
While markets continue to worry about the debt crisis, a couple of surveys painted a slightly more reassuring picture of consumer confidence in Germany and the UK.
The Nationwide consumer confidence index for Britain crept up to 40 last month from a record low of 36 in October, but was still about half its long run average of 77.
Meanwhile, German consumer morale held steady going into January, as income expectations and views of the economy improved despite a softening of households' willingness to make major purchases. The rise in confidence in the economic outlook was the first such improvement in five months.
The latest consumer sentiment indicator from the GfK market research institute, based on a poll of 2,000 Germans, held at 5.6 - the same reading as in December and also a year ago - despite economists' forecast for it to fall to 5.5.
GfK said:
Consumers at the moment clearly find the continued strong economic conditions better than in the past months.
The labour market appears robust overall and points to further falls in unemployment. Most German companies are busier than average.
About 3m jobs could be at risk if Britain does not stay at the heart of Europe, leading businessmen suggested today.
In a letter to the Telegraph, a group of 20 businessmen urged the government to seize opportunities to "re-engage in the decision-making process" in the European Union, arguing that Europe's future was vital to Britain's economic interests.
Signatories include Virgin boss Sir Richard Branson, British Telecom chairman Sir Mike Rake, and Sir Martin Sorrell, chief executive of advertising group WPP. Roland Rudd, the chairman of Business for New Europe, former EU trade commissioner Lord Brittan, and Sir Stephen Wall, Tony Blair's former adviser on Europe, have also signed the letter. Their intervention comes 10 days after David Cameron vetoed EU treaty reforms.
The business leaders write:
The government estimates that three million British jobs rely on exports to our European partners. The EU's institutions, from the commission to the European Court of Justice, exist mainly to safeguard the single market's level playing field. Protecting the single market has to be the bedrock of our re-engagement with Europe.
They also argue that it is in Britain's interest for the euro to survive, and that the EU's single market is "of great importance" to the UK.
It accounts for over half our trade, but we must deepen and widen it, and push for reform in services, telecoms, the digital arena and energy.
While we're still waiting for France to lose its top credit rating, a move that is expected before Christmas, some early morning musings from Evolution Securities:
Still nothing from S&P on euro area ratings, wonder if they maybe use this as a sort of advent-calendar opening another door every day. One day showed high Italian yields, another day there was weak economic growth, then a festive group of disagreeing European leaders, on the 9th of December there was that agreement with relatively little substance – we know pretty much what is behind the big door, but is it one notch or two and what about Germany?
London's leading shares have fallen more than 30 points to 5334 in the first couple of minutes of trading, a 0.55% loss.
On currency markets, the euro has hit a 10-month low against sterling in thin year-end trade. The single currency dropped to 83.705p, the lowest since mid-February.
Turning to commodities, Brent crude futures climbed above $104 a barrel on growing threats to supply. Hundreds of oil workers held a third day of protests in Kazakhstan, which pumps around 1.6m barrels a day. Concerns over supplies from Iran also resurfaced after the OPEC member said crude production had dropped due to lack of investment in its oil fields.
Ben Le Brun, market analyst at OptionsXpress in Sydney, told Reuters:
Geopolitical tensions that threaten oil supply have put a floor under prices. With better economic data out of the United States, there are enough factors to push oil higher, barring any surprises out of the eurozone.
Good morning. Welcome back to our rolling coverage of the eurozone debt crisis.
Asian stocks and the euro steadied but sentiment remains fragile. Tokyo's Nikkei rose 0.5%, after hitting a new three-week low yesterday, while Hong Kong's Hang Seng edged down 0.3%.
Michael Hewson, market analyst at CMC Markets, expects the FTSE 100 index to open 12 points lower at 5,353, while Germany's Dax is set to open 10 points lower at 5,661.
The single currency slid back towards its recent lows yesterday after the failure of European finance ministers to agree on the full €200bn worth of additional loans to the IMF. The figure now looks likely to be closer €150bn after the UK said it would only contribute as part of a wider global agreement, and only if other countries outside the EU participate. Other EU nations also expressed reservations about the loans, including Germany's Bundesbank, but indicated they would take part if countries like the US also did so.
In Spain the new prime minister outlined a whole range of reforms, including moving public holidays to the nearest Monday or Friday to avoid lengthy shutdowns, but admitted that the country was likely to miss its fourth-quarter growth target. Fiscal targets will also be missed amid further austerity and recession. Claiming that the outlook for Spain "couldn't be darker," and that the country risked "being left behind," Rajoy pledged to cut spending, raise pensions (the only item where spending will be increased), profoundly alter labour laws, shrink the public sector and deliver a budget by March.
Spain will sell some short-dated debt later this morning. Greece will also sell three-month bills today. Hewson said of Spain:
Today's 3 and 6 month T-bill auction of around €4bn is likely to see yields continue at their recently elevated levels, and increasing the pressure on the Spanish economy.
There's a slew of confidence data out today in Germany and the UK, along with the CBI retail sales survey for December.