Advertisement
UK markets open in 2 hours 4 minutes
  • NIKKEI 225

    39,900.36
    +159.96 (+0.40%)
     
  • HANG SENG

    16,561.46
    -175.64 (-1.05%)
     
  • CRUDE OIL

    82.49
    -0.23 (-0.28%)
     
  • GOLD FUTURES

    2,161.70
    -2.60 (-0.12%)
     
  • DOW

    38,790.43
    +75.63 (+0.20%)
     
  • Bitcoin GBP

    51,134.98
    -2,934.78 (-5.43%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • NASDAQ Composite

    16,103.45
    +130.25 (+0.82%)
     
  • UK FTSE All Share

    4,218.89
    -3.20 (-0.08%)
     

FTSE 100 creeps higher and euro pares losses as worries over French election and new Greek debt crisis weigh on sentiment

  • Euro pares losses as worries over French election and Greek debt weigh

  • IMF says Greece needs to lower pensions, cut tax rates

  • EU faces crisis as IMF warns Greek debts are on ‘explosive’ path 

  • Hong Kong stocks enjoy boost from property developers

  • Pound hovers above $1.25 against US dollar

  • European bourses mixed at opening bell

  • FTSE 250 sets new record high for second consecutive day 

6:04PM

Market report: Aberdeen Asset Management rises as RBC says it will not need to cut its dividend

RBC Capital Markets boosted shares in Aberdeen Asset Management as it reassured investors the fund manager does not need to cut its dividend.

ADVERTISEMENT

The investment bank argued that Aberdeen’s negatives are “well known” by the market and more than reflected in the share price. As such, analysts hiked its rating from “underperform” to “sector perform”.

But make no mistake, this was not a bullish broker note. Peter Lenardos, of RBC, insisted: “We are not positive on Aberdeen because risks remain, the biggest being an anticipated turnaround in net flows.”

In February, the fund manager posted £10.5bn of net outflows for the three months to December-end, marking its 15th straight month of quarterly redemptions, amid concerns about growth in emerging markets.

Aberdeen asset management

City-wide analysts continue to tread with caution when it comes to Aberdeen as there are no “buy” ratings on the mid-cap stock.

Nevertheless, RBC has made the bold call nine months ahead of its full-year results that Aberdeen has the earnings capacity to maintain its dividend. The company itself recently touted its “strong balance sheet”.

Mr Lenardos also raised the idea of M&A, which he believes is “possible”.

“We believe that CEO Martin Gilbert continues to seek M&A, whether it is in the form of bolt-on acquisitions, merger opportunities, or a full takeover of the company.”

Shares rallied by as much as 5.5pc in intraday trade, before closing up 2.3p, or 0.9pc, at 253.1p.

On the wider market, the FTSE 100 crawled into positive territory at the closing bell, up 2.6 points, or 0.04pc, to 7,188.82.

UKX

Housebuilders dominated the leaderboard after Redrow posted a 35pc jump in half-year pre-tax profits to £140m. It also pointed to further growth in the second half of the year. Shares leapt 18p to 470.5p. The upbeat results boosted its peers, with Persimmon climbing 59p to £20.16, Taylor Wimpey advancing 4.1p to 176.2p and Barratt Developments rising 11.2p to 507.5p.

Redrow

Engine maker Rolls-Royce remained among the top risers for a second consecutive trading session after JP Morgan lifted its price target by 10p to 740p. It also increased its full-year earnings per share forecast by 11pc as it believes the group’s full-year results beat, which it alluded to recently, will be “reasonably material”. It follows a bullish note from Citigroup on Tuesday.  The FTSE 100 stock made gains of 19.5p to close at a near three-month high of 720p.

rolls royce shares

Elsewhere, an upgraded price target by JP Morgan lifted shares in Costa Coffee and Premier Inn owner Whitbread 72p higher to £40.47, while RSA Insurance inched up 7p to 593.5p after it  signed a deal to dispose of £834m of legacy insurance liabilities.

On the other side, miners came under pressure. BHP Billiton slumped 47p to £13.42 after it begun halting operations at its  Escondida copper mine in northern Chile ahead of a planned strike on Thursday. Its peers Glencore fell 5.8p to 312.1p and Rio Tinto dropped 57.5p to £33.78, despite announcing a $500m buyback.

BHP Billiton

Private hospital group Mediclinic suffered a rating downgrade, falling 4p to 805.5p, while real estate investment trust Shaftesbury tumbled 11p to 890p after Barclays cut its rating to “underweight” as it sees “more attractive valuations elsewhere” in the sector.

Mid-cap homewares retailer Dunelm Group surrendered 61.5p to 623p on the back of a disappointing half-year trading update. Sales fell 1.6pc in the 26 weeks to December 31 on a like-for-like basis.

Elsewhere, broker Numis began covering Just Eat with an “add” rating and a price target of 650p as it believes the group is in “an enviable position” as a leading player in a growing market. The mid-cap stock edged up 3.5p to 553.5p.

Just Eat

Finally, JP Morgan took a positive view on Sirius Mineral pointing to its "compelling valuation and diminished financing risks" as it initiated coverage on the Aim-listed stock. Shares rose 1.4pc to 17.8p.

On that note, it's time to close for this evening. I'll be back again tomorrow from 8.30am. 

5:16PM

Property developer brothers Nick and Christian Candy accused of threatening business partner with selling debt to Russian gangsters

Away from financial markets, property developer brothers Nick and Christian Candy have been accused of threatening a business partner with selling debt to Russian gangsters. Rhiannon Bury reports: 

Property developers Nick and Christian Candy have been accused of threatening the pregnant wife of a former university friend and warning they would sell his debt to Russian gangsters, a court in London heard on Wednesday.

Mark Holyoake has accused the brothers of “a long-running, highly unpleasant and malicious campaign of threats, abuse, intimidation and coercion” in order to recoup a £12m loan given to him by the brothers’ company, CPC.

This included physical threats towards him and his wife, with Nick Candy suggesting during a telephone call that he “would feel terrible if anything were to go wrong during the pregnancy for her or the baby”, Mr Holyoake claimed in opening statements to the court.

He also alleges that Nick Candy warned him that if he did not comply with Christian Candy’s wishes to repay the debt, that it would be sold, potentially to Russians who would “not think twice about hurting [Mr Holyoake] or his family to get what they wanted”.

Read the full story here

4:47PM

European bourses close mixed; FTSE 100 creeps into positive territory

European bourses closed mixed after a choppy trading session dominated by fears of a fresh Greek debt crisis and worries about the outcome of the French election. 

By close of play: 

  • FTSE 100: +0.04pc

  • DAX: -0.02pc

  • CAC 40: +0.28pc

  • IBEX: +0.32pc

UKX 4:05PM

Europe's bank sector set for biggest one-day fall since early November

Europe's bank sector index is on track for its steepest one-day fall since early November. The index is currently down 2.1pc - and is negative year-to-date. 

Jasper Lawler, of London Capital Group, said: "Exuberance over Trump-inspired de-regulation rolled into fears over the economic consequences of election upsets in France, the Netherlands and Germany.

"A number of Europe’s biggest banks report next week so investors may be taking a little off the table ahead of what are likely to be less-than-stunning results. The steepening of the yield curve should provide some relief to Europe’s banks but we are sceptical it will translate to materially improved profits last quarter."

3:48PM

EIA: US crude oil stocks surge last week

US crude stocks surged last week as refineries cut output, data from the Energy Information Administration found today. 

Crude inventories rose by 13.8m barrels in the week ending February 3, compared with forecasts of a 2.5m increase. 

3:26PM

Greek debt crisis: A bigger mess than the Great Depression? 

3:25PM

Euro pares losses in afternoon trade

The euro has pared its losses in afternoon despite rising concerns about the French election and a new Greek debt crisis, following the IMF's first annual review of Greece's economy in four years. 

The single currency is trading flat, off by just 0.01pc at $1.10691 against the dollar. 

Earlier in the day, the euro dropped to an intraday low of $1.0642.

2:57PM

Greek central bank disputes IMF's view on bank capital buffer need 

 Greece's central bank is disputing the International Monetary Fund's view that the country's banks need a 10 billion-euro capital buffer to cover any further bailout support, saying the IMF does not explain why such support would be needed.

In an annual review of Greece's economic policies released on Tuesday, the IMF said that the buffer is needed because of n remaining risks to banks' asset quality and a "still bleak" prospect for profitability.

"Staff has maintained its assumption from May that a buffer of around 10 billion euros, 5.5pc of 2016 GDP, should be set aside to cover potential additional bank support needs," the IMF said in the report, which was released on Tuesday.

It said that despite successive recapitalisations that pumped about 43 billion euros, equaling close to 25 percent of GDP to Greece's public debt since 2010, the banks' balance sheets remain vulnerable to high levels of bad loans.

Another IMF concern is that half of Greek banks' capital comprises so-called deferred tax assets, which it views as contingent liabilities of the state.

The Bank of Greece disputes this. It says the IMF is "unduly pessimistic" in its macroeconomic and fiscal projections and that it played down the progress achieved in the banking sector.

"As far as banks are concerned, the Fund assumes that they will need a further 10 billion euros capital buffer without explaining why this is the case," Bank of Greece Governor Yannis Stournaras said in a statement attached to the report.

He noted that the Bank of Greece and outside supervisors such as the European Central Bank have assessed Greek banks to have CET1 ratio - used as a requirement of protection - of more than twice the statutory requirement.

The Bank of Greece also estimates that the attainment of medium-term bad debt reduction targets it has agreed with the country's lenders - Alpha , National, Piraeus and Eurobank - will further increase the CET1 ratio "substantially."

Greek banks have agreed with regulators on ambitious bad debt reduction targets spanning a 3-year time horizon.

The lenders are aiming to cut their so-called non-performing exposures (NPE) to 66.7 billion euros by 2019 from 106.9 billion euros in September 2016, meaning their NPE ratio to fall to 34pc from 51pc.

Report by Reuters

2:45PM

Wall Street opens lower as bank stocks slide

US stocks opened in the red this afternoon as banking stocks dragged indices lower. 

The Dow Jones fell 0.26pc, the S&P 500 lost 0.22pc and the Nasdaq dipped 0.21pc. 

2:40PM

Danske Bank: ‘Nexit’ risk after election is low

While markets appear to be worried about the French election, it is worth noting that the Dutch elections are on March 15. 

In a research note, Danske Bank says the far-right Freedom Party (PVV) led by Geert Wilders is likely to become the largest faction in the lower house after the parliamentary elections, while established parties from the governing coalition will probably see their support dwindle.

Some key points worth considering ahead of the elections: 

  1. Danske Bank does not think the PVV will be able to form a government, since other parties have ruled out forming a governing coalition with it. Instead, a lengthy coalition building process will start, with the new government likely to consist of a coalition of at least five centre-right and centre-left parties.

  2. Even if the PVV were somehow able to gain sufficient seats to form a government, it would still be very difficult to hold a referendum on EU membership. Referenda in the Netherlands are only advisory and without changes to current legislation a binding referendum on an EU exit cannot be held.

  3. Although the probability of a PVV government is low in our view, investor sentiment is unlikely to remain complacent as some risk premium should be included when the election date draws nearer.

Anthony Cheung, of Amplify Trading, alludes to this research note in his briefing today: 

2:22PM

Tullow Oil clinches stay of execution as it tackles $5bn debt 

Shares in Tullow Oil have fallen 4.9pc so far today after it posted a bigger than expected full-year loss. Jillian Ambrose reports: 

Tullow Oil has landed a one year extension on a billion dollar debt facility as it begins the task of tackling a rising debt pile of $4.8bn after a third consecutive year of losses.

The Africa-focused oil group took a heavy hit from the fall in the oil price after taking out billions of dollars in debt to develop the TEN oil project off the coast of Ghana.

Tullow Oil

But Tullow’s lenders have agreed to keep its $1bn corporate debt facility open until mid 2019 as the group kickstarts talks for a full-scale overhaul of its debt pile and the TEN project begins to bring in fresh streams of much-needed cash.

Despite the stay of execution the value of the FTSE 250 group's shares plunged over 5pc to 281.80 on Wednesday after the company revealed its third consecutive year of losses. Tullow’s operating loss of $754.7m was an improvement on its £1.09bn loss in 2015 but fell short of analyst expectations of $639.4m.

Read the full story here

1:57PM

German finance minister: No new situation on Greece

Bloomberg  is reporting this afternoon that a spokesperson for the German finance minister has told reporters in Berlin that there is "no new situation" on Greece.

The comments come after the IMF warned the EU is facing a looming crisis that could threaten the sustainability of the eurozone as Greek debts are on an  “explosive” path despite years of attempted austerity and economic reforms.

1:37PM

Proftits surge at Hargreaves Lansdown after Brexit boom

Shares in Hargreaves Lansdown tumbled towards the bottom of the blue chip index, down 2.5pc to £13.51, after falling cash returns anda  delay to a new savings products overshadowed robust half-year profits.  Sam Dean reports: 

Hargreaves Lansdown has increased its dividend by 10pc after profits surged by more than a fifth in the months following the vote to leave the European Union.

Net revenues at the Bristol-based investment group rose 16pc in the six months to the end of December, compared with a year earlier, sending pre-tax profits 21pc higher to £131m.

Hargreaves Lansdown

The results come despite continued economic uncertainty, which is affecting investor confidence, and follow what the company described as “sustained significantly elevated equity trading volumes since the Brexit vote”. Record highs in stock markets around the world had also generated additional revenue.

“Client reaction post the EU referendum and US presidential election have driven higher stockbroking volumes throughout the period,” said chief executive Ian Gorham, who will be is stepping down from the position in September and being replaced by Hargreaves' finance chief Chris Hill.

Read the full story here

1:13PM

Little change expected on Wall Street at opening bell

US stocks are set to open little changed when the opening bell sounds later this afternoon as investors focus on quarterly earnings. 

Yesterday, the Dow Jones and the Nasdaq both hit record highs. 

Connor Campbell, of SpreadExsaid: "Looking ahead to the US open and, excluding some out of nowhere nonsense from Trump, it seems that the Dow Jones will struggle to shift focus away from the Eurozone. The Dow managed to hit a fresh intraday high yesterday before falling back below 20100, with the futures suggesting that’s where it will find itself after the bell this afternoon." 

Here's a look at the opening calls courtesy of IG: 

1:08PM

Atkins boss hints that merger with CH2M would strengthen the engineering group

Shares in WS Atkins are trading 2.2pc higher this afternoon after third quarter results were in-line with expectations and chief executive Uwe Krueger declined to say if it had been approached by US rival CH2M. Our industry editor Alan Tovey reports: 

The chief executive of Atkins has hinted that his company is open to merger approaches, just weeks after reports of tie-up talks with peer CH2M Hill.

Speaking as the company updated on quarterly trading, Uwe Krueger said the engineering and design consultancy needs to grow.

WS Atkins

“In order to be sustainable in the long run you have to be major first-tier international player," he said. "With almost 20,000 staff we have not reached an optimal stage." However, he also added that the FTSE 250 business was “a major player”.

Mr Krueger said: “There are two fundamental drivers for growth: creating resilience through broader geographical spread and investing in new technology. You have to be of a certain size to play in the technology game.”

Read the full story here

12:07PM

Growing political uncertainty threatens to shake up the eurozone

As the spread between Italian and French government bond yields compared to their German counterparts hit multi-year highs, David Cheetham, of XTB, cautions that the growing political uncertainty threatens to shake up the eurozone.

He says: "Last summer’s Brexit vote has remained as the biggest driving force on UK sensitive assets for the past 8 months, but the growing threat of anti-establishment politicians succeeding in upcoming elections on the continent could have a major impact on these shores.

"As the US presidential election highlighted, the UK is inextricably linked to foreign developments and despite the vote to leave the EU last summer, UK markets remain vulnerable to external forces. With the French Presidential first round elections still over two months away the recent developments surrounding Francois Fillon are likely to only serve as a precursor for what is to come, with news yesterday that he was continuing his bid despite the scandal surrounding his wife’s pay contributing to the surge in yields on French debt. "

Profile | François Fillon 12:02PM

Which bank branches is TSB going to close?

Our banking correspondent Ben Martin looks at which bank branches TSB will close: 

More high street bank branches are set to close after TSB said it would shut a further 29 sites this year as its customers move online.

The challenger bank, which was spun out of Lloyds Banking Group and is now owned by Spanish lender Sabadell, said that no jobs would be lost as a result of the closures, as staff will be offered alternative roles at other sites and many employees already work in more than one TSB branch.

However, it takes the total number of TSB sites that will close this year to 38, leaving TSB with 550 branches. A list of the branches that are set to disappear is below.

“While we continue to focus on upgrading the branches that people use most, some locations are very quiet, serving fewer than 200 people a week,” TSB said. “In some cases this is because there is another branch less than a mile away.”

Thousands of bank branches have closed in recent years as more and more Britons choose to carry out their banking online.

Read the full story here

12:00PM

Half-time update: European bourses mixed as oil majors weaken

A weakness in oil stocks weighed on European bourses this lunchtime. However, some bourses managed to eke out gains buoyed by robust earnings updates. 

Just after midday: 

  • FTSE 100: -0.07pc

  • DAX: +0.03pc

  • CAC 40: +0.47pc

  • IBEX: +0.21pc

UKX

 Mike van Dulken, of Accendo Markets, said: "Major equity markets are positive but gains rather muted by weak Oil prices following a big US stockpile build that fuels concern about rising US production trumping OPEC cuts. This is weighing on risk appetite, adding to European (and US) political jitters and fresh interest in both fixed income bonds and traditional safe havens like Gold." 

11:50AM

Euro implied volatility jumps

The cost of insuring against volatility in the euro versus the dollar over the next three months has jumped to 10.313 today. 

11:38AM

L'Oreal 'considering' £1bn sale of The Body Shop

L'Oreal is considering a sale of The Body Shop. Sam Dean has the details: 

French cosmetics giant L’Oreal is considering a sale of The Body Shop little more than a decade after it acquired the beauty retailer for £650m, according to reports.

The retailer has been struggling compared to L’Oreal’s other divisions, and suffered a 3.2pc decline in reported sales in the first half of 2016, a 0.6pc like-for-like decline.

In third-quarter results published in November, L’Oreal revealed that the reported sales growth at The Body Shop were down 5.4pc, with the retailer also suffering a 2.8pc drop in like-for-like sales.

That contrasted sharply with the group total’s 5.6pc like-for-like growth in the third quarter.

The news comes a day before L’Oreal publishes its full-year results, and the Paris-based company is now working with bankers at Lazard to explore a potential €1bn sale of The Body Shop, the Financial Times reported. L’Oreal declined to comment. 

Read the full story here

11:22AM

FTSE 250 hits fresh record high

While the FTSE 100 languishes in the red, the mid-cap FTSE 250 index has set another fresh record high for a second consecutive trading session. 

It is currently trading 0.43pc higher at 18,638.71.

FTSE 250 11:02AM

BoE agents' survey: UK employers to offer smaller pay rises this year

Away from Greece, data from the Bank of England agents' survey showed this morning that UK employers expect to offer staff a 2.2pc rise this year, down from 2.7pc in 2016.

Here's the key points from the report: 

  • Consumer spending growth had remained resilient, but was expected to ease during the year as prices rose. Investment intentions had edged higher and pointed to small increases in spending during 2017. Export volumes growth had risen due to the fall in sterling and stronger world growth.

  • Hiring plans had edged up, but pointed to little change in staffing overall in the next six months. A survey indicated a modest rise in total labour cost growth in the year ahead. That was partly due to difficulties in hiring and holding on to staff and costs from the forthcoming apprenticeship levy.

  • Price pressures had continued to build through supply chains following sterling’s fall. So far, the main effect on consumer prices had been higher food and fuel prices. But a wider range of goods prices were expected to be affected over the coming year, causing inflation to rise further.

10:41AM

Euro pressured by political jitters and fears of new Greek debt crisis

Political uncertainty ahead of European elections and fresh fears about a new Greek debt crisis have prompted investors to offload the euro this morning. 

The euro has extended its fall, down 0.43pc against the US dollar at $1.0646.

Three months before the final round of France's presidential election, investors are concerned about the strong showing of far-right candidate Marine Le Pen, who has promised to take France out of the euro zone and to hold a referendum on EU membership.

Meanwhile, the IMF has warned that Greek debts are on an "explosive" path in its first annual review of the economy since 2013.

10:26AM

European bourses tread water in mid-morning tread

The bullish sentiment of yesterday of yesterday has largely evaporated today, as European bourses remain under pressure this morning. 

The FTSE 100 has already pared its earlier losses, and is trading down just 0.09pc at 7,179.93.

UKX

Joshua Mahony, of IG,attributes the caution across trading floors to a potential Le Pen victory.

"The possibility of a right wing win in France is raising fears in Europe, as highlighted by the rising yields on French treasuries. With the spread between French and German yields rising to the highest level in four years, there is clearly a significant degree of anxiety that is creeping into the market mindset. If 2016 told us anything, it is to expect the unexpected and whilst the UK’s referendum result was a knock to the EU, the upcoming elections have the  possibility to really undermine the project as a whole."

10:09AM

Why is the eurozone back in crisis over Greece?

Our friends over at the FT have a useful explainer about why the eurozone is back in crisis over Greece. 

Jim Brunsden explains the problem: 

"Greece’s international creditors, namely eurozone governments and the IMF, have markedly different opinions about the country’s economic situation and how to make its debt load manageable.

"The IMF has long argued the austerity demanded in Greece’s third €86bn bailout needs to be eased by lowering budget surplus targets and granting Athens substantial debt relief. But a German-led group of fiscal hawks have refused, particularly since more leniency likely means their taxpayers would have to pony up more rescue loans.

"Unless they resolve their differences, the IMF — which never formally joined the third bailout when it was agreed two years ago — will not fully participate in the programme. Thus far, only the European Stability Mechanism, the eurozone’s €500bn bailout fund, has been lending to Greece.

"The IMF has not distributed a bailout loan in nearly three years, and it has repeatedly said it will not join the third programme without major changes. Still, eurozone leaders have always assumed that at some point it will come on board as a lender." 

Read the full piece here

9:52AM

Rio Tinto announces $500m share buyback as profits rise 

Shares in Rio Tinto rose 1.3pc to £34.80 after it announced a $500m share buyback. Sam Dean reports: 

Rio Tinto will pay a bigger-than-expected dividend and  buy back $500m worth of its own shares after a recovery in commodity prices helped to hike profits at as the mining company.

The Anglo-Australian giant made an underlying profit of $5.1bn (£4.1bn) in 2016, a 12pc improvement from 2015, as it was boosted by a jump in iron ore prices.

The strong results means it will pay out an annual dividend of 170 US cents per share, which is equivalent to $3.1bn. It will also buy back $500m worth of its own shares over the course of 2017. 

Rio Tinto share price

It marks a stark contrast to its 2015 full-year results, when the FTSE 100 company abandoned its payout policy and posted its worst underlying earnings in more than a decade.

Since then, Rio Tinto has been hacking away at its debt, cutting costs and squeezing more out of its assets over the year, with a 30pc reduction in its net debt to $9.6bn.

Read the full story here

9:38AM

Old monsters rear their head in Greece

Back to Greece's fiscal woes. Edward Hardy, of World First, says the IMF's labelling of Greek public debt as ‘unsustainable’ is "a stark reminder that further participation by either the European Union or Greece’s thousands of bondholders could be required to finally resolve the country’s long-standing issues".

He adds: "With so many clashing voices already in the European Union, reaching a politically unpopular resolution to write off Greek debt is not what Brussels needs right now and that shows in Greek bond prices: for every tick lower in price, Greek assets dragged the euro with it yesterday." 

9:36AM

Sterling flat in choppy trade

Sterling is flat in choppy trade this morning, changing hands at $1.25 against the US dollar, as investors jumped on signs of growing pressure on the government to give parliament a greater say in the final deal to leave the EU.

Lukman Otunuga, of FXTM, said: "Sterling was extremely volatile this week as market participants reacted to signs of the UK government giving parliament a stronger say in the critical Brexit negotiations. It has become quite clear that Sterling remains dictated by the Brexit developments with price sensitivity set to heighten in the coming weeks as the article 50 invoke looms.

"The overall sentiment towards the Pound remains heavily bearish and uncertainty should provide a solid foundation for sellers to drag the Sterling/Dollar back towards 1.2350.  From a technical standpoint, the GBPUSD currently resides in a wide range but a breakdown below the pivotal 1.2350 level could encourage a steeper selloff back towards 1.2050."

9:15AM

IMF report on Greek economy: Key charts

9:13AM

Deutsche Bank: IMF annual review of Greek economy sparks war of words

The IMF's annual review of the Greek economy has sparked "a bit of war of words", Deutsche Bank said this morning. 

In the report, which was released overnight, the IMF warned that Greece would fail to hit the budget surplus targets set under the bailout terms by its creditors following its annual assessment. The IMF also warned of a possible “rekindling” of Grexit risk and that “even if the authorities’ policy program stays on tracks, high risks to the baseline remain”.

Strategist Jim Reid, of Deutsche Bank, said: "The findings of the review appeared to spark a bit of war of words. Greek Finance Minister Euclid Tsakalotos said that the IMF’s assessment of Greece’s economy is not representative of the actual effort exerted by the Greek government during the ESM program. Tsakalotos also said that the IMF’s view is “outdated” and based on “overly pessimistic assumptions”. Dutch finance minister Jerome Dijsselbloem added that he would like to have the IMF “on board” for full participation in the Greek bailout programme but that “they must be honest”, saying that “Greece has already had four quarters of economic growth and has had a pretty good recovery at the moment”.

"A familiar stand-off feeling then and should things continue to remain in a bit of a stalemate through February then it’s possible that things go on hold until after the Dutch election in March." 

9:10AM

Reform momentum has slowed in Greece, says IMF 

The International Monetary Fund has also said the reform momentum has "slowed" in Greece. It reckons this partly reflects "fatigue associated with the social costs of adjustment". 

It says that Greece implemented important reforms early in the adjustment programme, but this has since slowed. 

The IMF added: "This reflects the inability of the political system to maintain popular and political support for the reform effort amid an increasingly frayed social and political fabric and a perception that the adjustment costs were unequally borne by some groups (e.g. wage-earners) while others were protected (e.g. the self-employed, current pensioners). Over the last six years, Greece had seven governments, including from the center right, and center left, as well as technocratic (including two caretaker governments), but none was able to successfully mobilize the broad political support necessary to complete the two previous Fund supported programs (only 10 out of 24 planned reviews were completed).

"The uncertainty associated with frequent political crises paralyzed decision-making or led to unwinding of reforms. Against the background of a somewhat weak external environment, such unwinding of reforms fueled occasional fears of Greece’s departure from the euro zone (“Grexit”), leading to confidence shocks and exacerbating the downturn."

Read the full annual review of the Greek economy by the IMF here

9:06AM

IMF: Greek economy has not yet recovered

Despite significant progress in unwinding its macroeconomic imbalances, Greece’s economy has not yet recovered, the IMF said, in its first annual review of the economy in four years.

It said: "Greece entered the crisis with exceptionally large fiscal and external imbalances. Policies supported by its two previous adjustment programs helped to address these imbalances, with both the primary and current account deficits having declined from double digits to around balance in recent years.

"This is an impressive adjustment, especially for a country belonging to a currency union. Exceptional official financing totaling around €260bn (147pc of GDP) helped to buttress the adjustment and keep Greece in the euro-zone. Nonetheless, Greece has not managed to return to sustainable growth, with output having contracted by more than 25pc since 2008, investment down by more than 60pc, and unemployment at the highest level in the euro-zone." 

9:03AM

IMF's key recommendations for Greek authorities

In its first annual review of the Greek economy since 2013, the IMF said the authorities must deepen and accelerate reform implementation if they want to achieve sustainable and more equitable growth. Here's the IMF's key recommendations: 

  1. Fiscal policy: Given its cyclical position, Greece does not require further fiscal consolidation at this time beyond what is currently underway. Medium-run fiscal targets should be supported by preferably fiscally-neutral high quality reforms that broaden the personal income tax base and rationalize pension spending to allow the public sector to provide adequate services and social assistance to vulnerable groups, while creating the conditions for investment and more inclusive growth. Fiscal reforms should be complemented by efforts to address tax evasion and the large tax debt owed to the state.

  2. Financial sector: NPLs should be reduced rapidly and substantially to allow for a resumption of credit and growth. This requires additional efforts to strengthen and implement fully the debt restructuring legal framework and enhance supervisory tools. At the same time, bank governance needs to be further strengthened and capital controls eliminated as soon as prudently possible, while preserving financial stability.

  3. Structural reforms: More ambitious labor, product and service market reforms are needed to enhance competition and support growth. A return to the previous less flexible labor market framework should be avoided, as this would put at risk the potential gains for investment and job creation.

  4. Debt relief: Even with these ambitious policies in place, Greece cannot grow out of its debt problem. Greece requires substantial debt relief from its European partners to restore debt sustainability.

8:59AM

French and Italian bond yield spreads over Germany hit fresh multi-year highs

Italian and French 10-year government bond yield spreads over Germany hit fresh multi-year highs this morning as worries about political risks in Europe continued to rattle financial markets. 

Analysts at US investment bank Citi said: "The ongoing elevated political headline risk is governing much of the spread tone in widening (French) OAT-Bund spreads.

"With the French Presidential first round elections still over two months away, ongoing headline risks are likely to continue to weigh on the broader tone."

The gap between the French 10-year government bond yield and the German 10-year yield rose to 78.8 basis points, that's its highest level since November 2012, while the yield on Italy's 10-year government bond rose to a three-year high of 201.8 basis points over Germany. 

8:51AM

EU and IMF threaten to open a massive rift over Greek finances 

Back to Greece, Michael Hewson, of CMC Markets, notes that Greece's finances look set to  make a comeback to the front pages of the business section again as fresh splits between the EU and IMF threaten to open a massive rift.

It comes after the head of Eurogroup Jeroen Dijsselbloem criticised the IMF for being overly pessimistic about Greece's prospects, saying that Greece was making good progress.

He added: "The IMF on the other hand disagrees and appears unwilling to throw more money at a problem with no end unless EU creditors look at debt forgiveness, given the unsustainability of the current debt trajectory. A fresh flare up in the Greek crisis is particularly difficult timing given the proximity of elections in Holland, France and Germany, and a €7bn debt repayment due in July."

Meanwhile, Connor Campbell, of SpreadEx, said: "With Draghi disappointing the euro on Monday, an anti-EU presidential campaign from Marine Le Pen and, perhaps most pressingly, the re-emergence of the debt crisis in Greece (something that never really went away, but that has only just returned to the forefront of investors’ minds) the region is having a largely negative return to the spotlight."

8:47AM

Another mixed start in Europe

It was another mixed start for European bourses as robust corporate earnings pushed some stocks higher while other floundered. After outperforming its peers yesterday, the FTSE 100 has come under pressure as Hargreaves Lansdown lost 2.5pc despite posting half-year pre-tax profits of 21pc. 

Here's a snapshot of the current state of play in Europe: 

 Mike van Dulken, of Accendo Markets, said: "Calls for a positive open come after a cautiously positive US close and thanks to solid gains in Asia overnight although progress held back by Energy which has been weighed on by a surprisingly large US API oil inventory build stoking fears that rising US shale production will outweigh OPEC cuts deigned to rebalance the global oil market.

"Geopolitical and economic fears also persist in the run-up to multiple elections in Europe (Netherlands, France Germany) and with a US President both lighting and fighting fires. Jitters are serving to usher Gold back to 3-month highs and encourage investors to take a fresh look at bonds." 

8:43AM

Hong Kong stocks get boost from China property developers

Taking a quick look at what happened over night in Asian trading, Hong Kong stocks erased early losses and closed at 3-1/2-month highs, boosted by shares of China property developers and brokers.

The benchmark Hang Seng index ended up 0.7pc at 23,485.13 points, while the Hong Kong China Enterprises Index gained 1.1pc to 9,955.34.

An index tracking mainland real estate stocks added 5.6pc, clocking its best one-day gain in 11 months.

Heavyweight developer China Vanke  jumped 3.8 pc after it reported January sales grew nearly 90pc, compared with the same period last year. 

Sentiment was also lifted by rising capital inflows from investors in mainland China.

Report from Reuters

8:38AM

EU faces crisis as IMF warns Greek debts are on ‘explosive’ path 

Here's our full report on the IMF's first annual review of Greece's economic policies in nearly four years: 

The EU faces a looming crisis which could threaten the sustainability of the eurozone as the International Monetary Fund has warned Greece’s debts are on an “explosive” path despite years of attempted austerity and economic reforms.

Global financiers at the IMF are increasingly unwilling to fund endless bailouts for the eurozone’s most troubled country, passing more of the burden onto the EU - at a time when Germany does not want to keep sending cash to Athens.

Greek general government debt 2015

The assessment opens up a fresh split with Europe over how to handle Greece’s massive public debts, as the IMF called on Europe to provide “significant debt relief” to Greece - despite Greece’s EU creditors ruling out any further relief before the current rescue programme expires in 2018.

Jeroen Dijsselbloem, the Eurogroup President repeated that position last night, saying there would be no Greek debt forgiveness and dismissing the IMF assessment of Greece’s growth prospects as overly pessimistic.

"It's surprising because Greece is already doing better than that report describes," said Mr Dijsselbloem, who chairs meetings of eurozone finance ministers, adding that Greece was on track for a “pretty good recovery at the moment”.

Read the full story here

8:36AM

Agenda: Investors fear new Greek debt crisis

Good morning and welcome to our live markets coverage. 

This morning the euro remains pressured as doubts over the policies of US President Donald Trump, a looming election in France and a new Greek debt crisis sapped investors' confidence.

Wrangling over Greece's bailout are starting to haunt the market ahead of the euro group meeting on February 20. The two-year Greek debt yield soared to near 10pc yesterday, compared to around 6pc just about two weeks ago.

Meanwhile, the IMF said Greece needs to reduce the proportion of its budget spent on "unaffordably high" pensions which are paid for by high tax rates to stimulate economic growth. 

In its first annual review of Greece's economic policies in nearly four years, the IMF said that Greece instead should work to broaden its tax base and reduce tax rates, while providing more targeted spending to support the poor and other essential public services.

"We are saying that Greece needs to take some fairly difficult decisions to make its budget much more growth-friendly," IMF European Department Director Poul Thomsen said.

Also on the agenda: 

Full-year results: Tullow Oil, Smurfit Kappa, Rio Tinto

Interim results: Sophos Group, GlaxoSmithKline, Hargreaves Lansdown, Dunelm, Redrow

Trading update: Victrex, Severn Trent

Economics: NIESR GDP estimate (UK), 10-year bond auction (US), federal budget balance (US)