Britain's safe-haven reputation in doubt on GDP slump
Europe banks rally and sterling takes tumble in latest blow to Chancellor
Saturday 26 January 2013
Britain's safe-haven status was dealt a severe blow yesterday as the eurozone's beleaguered banks showed signs of recovery and the pound sank on dire growth figures.
The European Central Bank pumped more than €1 trillion (£843bn) into the region's banking system in December 2011 and March last year to avert a credit crunch, as fears of a full-scale bailout for Spain and Italy shook markets. The unprecedented long-term refinancing operations offered the funds to more than 500 banks at rock-bottom rates for three years.
But yesterday the ECB revealed that 287 banks have opted to pay back €137bn of the €489bn handed out in the first of the LTROs as soon as next week, in one of the clearest signs yet that the funding pressures on the eurozone banking system are beginning to ease.
Mario Draghi, the ECB's president, also bought time for the eurozone last summer when he promised to do "whatever it takes" to prop up the euro, including intervening directly to buy up the debt of member states if they request aid.
Analysts had expected the banks to repay around €100bn. Michael Symonds, at Daiwa Capital Markets Europe, said: "This is more than we had expected, and underlines the material improvement in funding conditions for most European banks in the past 12 months and, in particular, since the ECB also extended its backing to euro area sovereigns last summer."
Jurgen Michels, European economist at Citigroup, added: "The high figure of the repayment today suggests that in addition to core country banks, with excess liquidity, also banks from periphery countries used the repayment option, probably partly in order to demonstrate to the market that they are in a healthier position."
The positive signs sent the pound sinking to its lowest level for more than a year against the euro, hitting a low of €1.1714 at one point before recovering slightly. The single currency also roared to an 11-month high against the dollar.
Sterling briefly fell to a five-month low against the dollar as a dire 0.3 per cent decline for the UK economy in the final three months of 2012 spooked investors and raised expectations of further quantitative easing from the Bank of England's rate-setters.
Glenn Uniacke, head of options at the foreign exchange specialist Moneycorp, said the pound was being "slaughtered". "The tanking pound is curiously at odds with the soaring stock market, but that will be of little comfort to struggling importers."
Simon Derrick, chief currency strategist at BNY Mellon, added: "Weak GDP is one of a number of pressures on sterling. There's also the potential loss of the AAA rating and the improving picture in the eurozone, which is lessening its safe-haven attraction."
Data showing German business morale improving for the third month in a row in January – adding to signs that growth in Europe's economic engine room is picking up – also fanned demand for the euro.
Investors also sold out of a host of other safe-haven assets such as German and French sovereign debt yesterday as traders took on more appetite for risk. Italy and Spain's cost of borrowing fell to 4.1 per cent and 5.1 per cent respectively, far below the unsustainable 7 per cent seen at the height of the market panic last year.
By performing as African Americans or Indians, white people get to play act a kind of 'imaginary liberation', writes Michael Mark Cohen
New essay by JK Rowling went live on Pottermore site this morning
New UK station Russia Today gives a very bizarre view of Britain
Top Gear presenter is no stranger to foot-in-mouth controversy
- 1 Canadian actor punched in face after 'Islamophobia' experiment goes wrong in wake of Ottawa shooting
- 2 Topshop at centre of row over body image as 'shocking' skinny mannequin photo goes viral
- 3 Woman blinded as a child can see again after hitting her head on a coffee table
- 4 Top Gear presenter Jeremy Clarkson criticised for beer tweet
- 5 The bubble bursts for Sodastream
'Nasa Confirms Six Days of Darkness in December': No, they don't - it's a hoax
Woman blinded as a child can see again after hitting her head on a coffee table
Top Gear presenter Jeremy Clarkson criticised for beer tweet
The bubble bursts for Sodastream
Russian politician says Apple CEO Tim Cook should be 'banned' from country after coming out as gay
Pope Francis declares evolution and Big Bang theory are real and God is not 'a magician with a magic wand'
Huge surge in Ukip support after EU funding row, according to new poll
Ukip ‘exploiting grooming scandal’ to secure party’s first police chief
Nigel Farage: 'There’s nothing wrong with white people blacking up'
Maureen Lipman says 'she can't vote Labour while Ed Miliband is leader'
Muslims, immigration and teenage pregnancy: British people are ignorant about almost everything
iJobs Money & Business
£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £23250 Per Annum pro rata: Clearwater People Solutions Ltd: Pro rata ...
£40 - 48k + Benefits: Guru Careers: We are seeking a Marketing Manager to join...