6.19pm: This from DB's Q1 interim report: "Deutsche Bank AG has received various subpoenas and requests for information from certain regulators and governmental entities in the United States and Europe ... in connection with setting interbank offered rates for various currencies"
And:
"In addition, a number of civil actions, including putative class actions, have been filed in federal courts in the United States against Deutsche Bank AG ... on behalf of certain parties who allege that they transacted in Libo-based financial instruments and that the defendants manipulated, through various means, the U.S. dollar Libor rate and prices of U.S. dollar Libor-based derivatives in various markets"
4.41pm: Liborgate spreads its tentacles....
German market regulator Bafin is reportedly conducting an investigation into Deutsche Bank as part of a wider probe into manipulation of the Libor rate. The bank's shares fell about 4% on the news, even though Deutsche disclosed in its annual report it was being investigated by the authorities.
Results from the probe are due in the middle of this month. Do we also get a TV grilling of DB bosses a la Bob Diamond?
4.19pm: Finland has been very vocal in recent days/weeks about the problems of the eurozone, and how it will not be a paymaster to bail out struggling members.
That seemed to be reinforced today by an interview with its finance minister. Now economist Nouriel Roubinin has looked at the prospect of Finland leaving the eurozone, the Fixit in the parlance. His conclusion?
A trigger to increase the chances of Fixit would be a decision by the eurozone to increase the potential losses and credit risk of the core members—including Finland's—via a fiscal and transfer union, debt mutualization and eurozone-wide deposit insurance. At that point, the forces pushing for Fixit may get the upper hand.
3.56pm: The US jobs figures announced earlier seem a bit Goldilocks - not cold enough to prompt action by the US Federal Reserve to boost the economy, not hot enough to make people think the recovery is happening.
Having said that, some seem to think they're actually bad enough to prompt the Fed to act, University of Pennsylvania economist Justin Wolfers for one. Full story on our US live blog on the jobless numbers, but here's a taste:
My bet is that there's some sort of communication – a video conference or phone meeting, perhaps – occurring right now. So there's a good bet that we'll see a further round of quantitative easing, QE3, sometime tomorrow. If that forecast is wrong, then I'm sure they'll act by the time they next meet.
Does he really mean tomorrow - Saturday - or could it wait until Monday once the weekend is over? That surely smacks of panic, which the markets are unlikely to cope well with.
2.57pm: Our City editor Jill Treanor has written about the SFO decision to investigate the Libor scandal.
She says:
The decision to embark on a formal investigation appears to been taken quickly as on Monday the SFO had said it was considering "whether it is both appropriate and possible to bring criminal prosecutions".
"The issues are complex and the assessment of the evidence the FSA has gathered will take a short time, but we hope to come to a conclusion within a month," the SFO had said on Monday.
You can read her full story here
And with that, I'm handing over to Nick Fletcher.
2.51pm: The risks from any direct financial assistance given by the European Stability Mechanism (ESM) to banks, like the payout for Spain's struggling institutions, would remain the responsibility of the country making the request, according to Reuters.
It quotes an unnamed senior eurozone official saying: "It remains the risk of the sovereign because you have the counter guarantee by the sovereign."
The official added there would be an "endorsement" of a rescue for Spain's banks but no final agreement on Monday when finance ministers meet in Brussels.
Dampening expectations, perhaps?
2.39pm: Libor scandal update
The Serious Fraud Office has launched a formal investigation against Barclays over allegations of fixing Libor after the bank was fined £290m by the FSA and US authorities.
That could make Chairman Marcus Aegius's questioning by MPs on the Treasury Select Committee next week, um, difficult. We can only imagine he's looking in the mirror repeating "I cannot comment during the ongoing investigation"
2.35pm: Back to matters closer to home.
Here's some reaction to Ian McCafferty's appointment to the Bank of England's MPC to replace Adam Posen from Philip Rush at Nomura.
He generally welcomed the appointment, although notes that the Treasury failed in its attempts to appoint a woman.
He added:
With two ex-city economists, five career central bankers and one academic, he will become the closest thing to an industrialist the MPC has. So the perspective and experience he is bringing to the table may prove valuable to the MPC.
It is too early to call what end of the "avian scale" Ian McCafferty will take to. While Chief Economic Adviser at the Confederation of British Industry, he made numerous dovish comments, but it is difficult to disentangle his own views from those of the industry body, whose members wanted looser policy. So he may not be that dovish at all.
Indeed, the MPC's former arch-hawk Andrew Sentence (CBE) also once worked for the CBI, not that that commonality need extend that far. For now, we assume he is broadly in agreement with the path that the MPC is taking, but will not be the cheerleader for it that Adam Posen was.
2.06pm: For more information on the US job figures, check out our US team's live blog covering all the reaction from across the pond here
2.00pm: As analysts pore over the jobs report from the US, there's a mixed response to the below-expectation figures. One thing is for sure, all eyes now shift to the Fed for their 31st July meeting where Bernanke must decide whether to introduce QE3, or stick with his current plans to shift money around.
Out on Twitter:
June jobs report is not hot, but also, it's not so bad as to trigger an immediate Fed response. Operation Twist will carry things for now.
— Michael Derby (@michaelsderby) July 6, 2012
We are now averaging just 150k jobs a month this year, LESS than the anemic 153K of last year
— James Pethokoukis (@JimPethokoukis) July 6, 2012
1.38pm: US nonfarm payrolls figures below expectations
In June, the numbers rose up 80,000 compared with May at 77,000 - it has been revised up from 69,000)
Private sector jobs are up 84,000, compared with May at 105,000, with average earnings up 0.3%.
However, expectations were that June would increase by between 90,000 and 100,000, with private sector jobs expected to be up by 102,000.
Unemployment remains flat at 8.2%
Reaction as it comes.
1.10pm: FINLAND UPDATE
Well, that was shortlived. It seems the Finnish threats on the eurozone are now being played done. More details as we get them.
Denials right on schedule...RANsquawk: Reports of Finland threatening to quit the Euro are false according to the finance ministry
— Open Europe (@OpenEurope) July 6, 2012
12.46pm: Italy's deficit cutting is actually ahead of the UK and US, says Holger Schmieding at Berenberg Bank. He adds:
The euro crisis may show up in sovereign debt markets, but the Eurozone's public debt is not more problematic than in other western countries. The Eurozone's 2011 public deficit of 4.2% of GDP was half that of the UK (8.3%) and even less compared to the US (9.6%). At 88% of 2011 GDP, gross public debt levels are similar to the UK (86%) and lower than in the US (103%).
It is not the lack of adjustment, either. Italy is on track to meet the Maastricht criterion of a 3% budget deficit ratio this year, after 3.9% in 2011. Tax measures taken last year are bearing fruit and cut monthly borrowing to 2.9% of GDP in June 2012. Italy is far ahead the UK or US in terms of adjustment.
The key difference between the Eurozone and other western countries is the role of the central bank. Many central banks have purchased vast amounts of government bonds to stabilise the financial system. The Bank of Japan's asset purchase programme stands at 15% of GDP, the US Federal Reserve's at 17% and the Bank of England has just increased its target to £375bn or 25% of GDP.
The ECB has only bought 3% of GDP's worth of assets. Large-scale long-term liquidity provision to banks has expanded its balance sheet since 2008 by €1.6trn or 17% of GDP, but LTROs are not quantitative easing: they are largely substituting cross-country private interbank financing.
The ECB leaves it to Eurozone governments to convince investors of the desire and ability to continue servicing their debt and sticks to its price stability mandate. This triggers front-loaded fiscal pain and reforms in the South and financial support from northern Europe where markets lose confidence.
Without smoothing by central bank intervention, the process remains subject to considerable risks, not least the political risks of reform fatigue in the South and rescue fatigue in the North.
12.38pm: Here is a lunchtime round-up.
Rather worryingly, Spanish and Italian bond yields are back at pre-EU summit levels. The Spanish 10-year yield has broken through the 7% danger mark again, up 25 basis points at 7.038%. The Italian equivalent has risen through 6%, another important level - up 5 bps at 6.046%.
Turning to stock markets, the FTSE 100 index in London is treading water ahead of key US jobs data, out at 1.30pm BST. It is down 0.4 points at 5692. Germany's Dax and France's CAC are both down 0.4%, while Spain's Ibex has tumbled 1.3% and Italy's FTSE MiB has lost 0.6%.
UK producer price figures showed factory gate inflation easing to a three-year low, while Spanish industrial production data were pretty dire, down 6.1% in May. In Germany, output was up 1.6% month on month.
Here in the UK, American economist Adam Posen will be replaced by the CBI's economic adviser Ian McCafferty on the Bank of England's monetary policy committee.
12.29pm: Adam Posen's replacement on the Bank of England's all-important Monetary Policy Committee has been revealed as Ian McCafferty. He is the chief economic advisor at the CBI and will have big shoes to fill when he takes over from heavyweight Posen, who has been a consultant on economic and foreign policy issues to several US government agencies, the European Commission, the UK Cabinet Office, and to the IMF.
Posen has also been a member of the Panel of Economic Advisers to the US Congressional Budget Office, is a visiting scholar at various central banks across the world, has written six books and is a member of the Council on Foreign Relations, the Trilateral Commission, and of the Bellagio Group of international economic academics and officials.
McCafferty, who has been in his position at the CBI since 2001, is formerly Head of Macroeconomics at BP and Director of International Economics for Natwest Markets.
Posen is off to head up the Peterson Institute in Washington.
12.04pm: Ahead of the US jobs figures (non-farm payrolls today at 1.30pm BST, after decent US employment figures from the ADP payroll company yesterday) experts believe the numbers will be up 100,000 month-on-month compared with a dismal 69,000 in May. Unemployment levels are expected to remain the same, with any strong rise likely to delay QE3.
Here's some thoughts.
Michael Hewson CMC Markets said
Even a positive US ADP employment report couldn't mask the concern felt in the markets that stimulus could well be running out of road. Disappointing US same store sales for June came in at their worst levels in three years yesterday, reflecting increasing concern about the economic outlook whatever consumer confidence numbers would appear to suggest.Today's US Non-farm payrolls report will offer important clues as to whether or not yesterday's ADP report was a one-off.
Another poor jobs number could well raise expectations of further Fed easing, however given the market reaction to the combined central bank efforts yesterday you have to ask yourself how effective any Fed action would be.
Andrew Taylor at GFT Markets said
Tonight's final Non Farm Payrolls before the next FOMC meeting [that's Federal Open Market Committee] will be all about the expectations of the Fed announcing QE3. The current market sentiment is less panicked post EU Summit which means we would need to see a print less than the previous read of 69k for the Fed to move closer to what the equity and commodity bulls are after.
An increase over and above the forecasted 90k should see Chairman Bernanke remove his finger from the panic button.
Ilya Spivak at DailyFX said
"US economic data has increasingly underperformed expectations over the past two months, hinting investors are likely to interpret the result in terms of its implications for the likelihood of another round of Federal Reserve quantitative easing.
"Needless to say, a print that trumps forecasts can be expected to have the opposite effect as stimulus hopes fade. A pick-up in the service-sector ISM employment index as well as yesterday's firm ADP print seem to tilt surprise risk toward the latter scenario."
Chris Beauchamp at IG Index said
"Expectations for today's job numbers are that the US economy added 100,000 jobs in June, forecasts having been increased yesterday after a stronger ADP employment report. The unemployment rate is expected to hold steady at 8.2%. A stronger number would provide a much-needed boost to confidence, especially now that eurozone worries are creeping back in, with Italian and Spanish yields pressing higher once again."
11.39am: Our Rome correspondent John Hooper gives us a quick overview of Italy's woes and what it means for the country's 10 year bond yield going over 6%
The rise in Italian borrowing costs to 6% is a bitter pill for Italy's prime minister, Mario Monti, coming at a time when he is making much-resented savings. During the night, at the end of a seven-hour meeting, his cabinet agreed to cuts that aim to slice €26 billion out the budget over three years.
Some will really hurt, like reductions in the number of hospital beds and the funds available for universities. The government's line is that the savings can be made by greater efficiency -- and there is certainly scope for that in Italy.
But the politicians who back the Monti government (and keep it in power) are already squirming in discomfort, and it remains to be seen whether they can bear the electoral heat that is coming their way.
Cuts directed at the public administration mean that for the first time Monti's non-party, technocratic government is taking on the country's super protected (and super-unionised) state employees.
The number of Italy's largely useless provincial authorities is to be drastically reduced. And civil servants will no longer be able to count on a job for life. The government is going to have a tough time getting these cuts through.
The fact that government bond yields should be rising against such a background underlines the degree to which they remain vulnerable both to generalised euro zone sentiment and the market's (understandable) fears about Italy's huge public debt (120% of GDP and still rising).
But it also highlights the risks to the euro zone of not giving Monti what he tried to get from last week's EU summit -- a mechanism to hold down borrowing costs by means of credible intervention on the bond markets.
A lot of Italian (and not just Italian) observers, perhaps influenced by Italy's 2-1 victory over Germany that night in Euro 2012, thought he too had emerged a winner. Subsequent comments by Angela Merkel and others suggest, however, that Italy's triumph on the field was a lot more clear-cut than the one in the conference hall.
11.25am: Some decisive news coming from Europe. In a newspaper interview, Finland's finance minister Jutta Urpilainen said the country would rather leave the eurozone than continue bailing out struggling countries.
According to AFP, she said: "Finland is committed to being a member of the eurozone, and we think that the euro is useful for Finland"
Finland will not hang itself to the euro at any cost and we are prepared for all scenarios.
The country still has a prized AAA credit rating and fears any shared responsibility could damage that status.
11.11am: Spanish 10 year bond yields hit 7%
Looks like any joy from last week's eurozone summit has well and truly gone. Reaction as we get it, but going past 7%, which means paying back effectively double what you borrow, is usually the trigger for a government bailout.
Spain has already had a bailout for its banks but this could be more serious.
11.04am: Better news from Germany, where industry output was up 1.6% month-on-month.
It was a huge leap by comparison with the consensus that growth would be just 0.1%. In understated fashion, Germany's economy ministry said industrial output remains "solid".
10.59am: Back to Italy.
It seems Italian banks have increased their holdings from the ECB. They held €281.4bn from the ECB at the end of June, up from €272.7bn in May.
Funds borrowed rose last month to €11.7bn from €4bn in May.
10.52am: A fake Barclays bus stop advert is doing the rounds on Twitter. Along the lines of "Barclays, best at fixed rates" etc. Unfortunately, it's not real.
But for a slice of irony and some light relief (hat tip to reader slackrabbit) here is a video of one of the bank's adverts from 2002 featuring Samuel L Jackson.
10.33am: Libor scandal update.
The Bank of England's deputy governor Paul Tucker will appear before the Treasury Select Committee on Monday where he will no doubt be defending himself from accusations by Bob Diamond that a call to the bank caused the "confusion" that led to the interbank lending rate to be fixed.
Tucker hopes to become the next governor at the BoE when Mervyn King steps down, but his rival for the top job, Adair Turner, FSA chairman will also be appearing - according to Reuters - in front of the committee of MPs to show off his credentials.
Marcus Agius, the former non-exec Chairman, now executive Chairman, of Barclays will also give his Libor views on Tuesday
10.19am: Last bond post for a bit. Promise.
BUT...
Spanish 10 year bonds are getting dangerously close to the 7% level economists consider is unsustainable
Current yield is 6.94% up 15bps
Italian 10 year bonds 6.02% up 2bps
The downbeat messages coming from banking officials can't be helping matters. IMF chief Christie Lagarde said earlier today the IMF is set to downgrade its forecast a day after Mario Draghi, ECB head, warned of "heightened uncertainty" in the eurozone.
We will let you know if Spain hits 7%
10.07am: Here's some reaction to the UK PPI figures.
Samuel Tombs at Capital Economics said:
The hefty 10% fall in crude oil prices caused overall input prices to fall by 2.2% on the previous month. This pushed the annual rate of input price inflation into negative territory for the first time since September 2009. And while oil prices currently stand 4% above their average level in June, provided they do not rise any further, annual input price inflation is likely to remain negative well into next year. Meanwhile, output prices fell by 0.4% m/m, causing the annual inflation rate to ease from 2.9% to 2.3%.
Given the relatively long lags involved, this points on past form to the potential for core consumer goods inflation to fall into negative territory in mid-2013. So, following a prolonged overshot of the MPC's 2% inflation target, it is becoming increasingly likely that we are now heading for an equally elongated period of below target inflation.
Howard Archer at IHS Global Insight said:
The June producer price data are benign, supporting hopes that consumer price inflation will head down appreciably further over the coming months. This would give the economy much needed support by easing the squeeze on consumers' purchasing power. It would also facilitate further stimulative action later this year by the Bank of England should the economy fail to improve.
Chris Williamson at Markit said:
A key driver of lower prices has been the sharp fall in oil prices since their peak earlier this year. Brent crude, for example, dropped more than 25% between March and June. At the same time, weak demand and over supply for many inputs has created a buyers' market, meaning companies have been able to negotiate discounts with suppliers.
A concern is that oil prices have crept up above $100 per barrel again recently, which will inevitably put some renewed upward pressure on manufacturers' costs in the near future.
9.47am: The Bank of England's new financial risk watchdog published the minutes today from its quarterly meeting.
Set up to avoid future boom and bust (where have we heard that before?) the minutes from the 22nd June meeting show the members have no concerns about conflicts when asking banks to reduce credit during the good times.
They say
It was noted that the primary objective to protect and enhance resilience and the news secondary objective were compatible. Indeed, the committee's recommendations... over the past year had been specifically designed to build resilience while supporting lending and growth.
For those who can't remember, the Financial Policy Committee recommended last week that banks should feel free to tap into their cash piles to keep lending. Genius.
9.38am: UK factory gate inflation has eased due to lower oil prices, which will be welcome news to the Bank of England.
According to official figures, producer output prices climbed 2.3% in June from a year ago, the lowest annual rate since October 2009, and below City forecasts.
Manufacturers' raw material and other costs fell back by 2.3% on the year - the biggest decline since September 2009.
9.31am: Good and bad news coming out of Spain.
Bad: Industrial output fell for the ninth straight month in a row in May. It fell 6.1% year-on-year in another real-life example of the crippling effect the problems are having on the country
Good: The 6.1% fall was less than the 8.5% that had been predicted, and was at a slower rate of decline compared with the 8.3% drop (year on year) in April.
Production hasn't grown in Spain since February 2011.
9.17am: Here's some reaction to yesterday's big moves by the BoE, ECB and China's central bank to stimulate some growth.
Most analysts and experts were unimpressed, but some were surprised by the reaction (or lack of) from the markets.
Michael Hewson at CMC Markets said:
Yesterday's market reaction to the combined policy actions of the Bank of England, European Central Bank and the People's Bank of China is a worrying sign that the drug of central bank stimulus could be wearing a little thin as investors slowly come to the realisation that monetary policy could be starting to reach its limits... throwing more money won't remove the problem of banking systems buckling under increasing amounts of bad debt.
Another poor jobs number could well raise expectations of further Fed easing, however given the market reaction to the combined central bank efforts yesterday you have to ask yourself how effective any Fed action would be.
Andrew Taylor at GFT Markets said:
The overnight flurry of Central Bank action has done little to build confidence in markets as equities and commodities continued on with the negative lead set by the US.
As the ECB and BoE fired shots from their depleted stimulatory arsenal, the PBoC decided to join the fray in what looks to be an uncoordinated effort with its counterparts.
Gary Jenkins at Swordfish Research said:
Three central banks taking action within an hour of one another to try and stimulate the economy and / or boost short term confidence and the market not only shrugged it off but it seemed to actually make matters worse in some areas.
It was particularly interesting to look at Spanish bond yields. At one stage in the morning the 10 year was some 22bps higher but after the central bank action it recovered to be just a few basis points away from being unchanged. However it ended the day 36bps wider at 6.74%. So after all the intervention, from both the central banks and the European politicians in the last week, the 10 year is now just 17bps lower than where it was the night before the European summit decision.
9.00am: Italian 10 year bond yield rose above 6% in early trading, but has now settled below the psychological threshold at 5.98%.
Over in Spain 10 year bond yields were up 5bps so far at 6.84%.
Markus Huber at ETX Capital summed it up:
Of much more concern however seems to be the sharp increase in periphery bond yields after yesterday's Spanish bond auctions to levels not seen in two weeks. Slowly the optimism after the last EU summit seems to be vanishing and reality is setting in with weak growth, high debt levels and unemployment once again in the spotlight.
8.46am:IMF chief Christine Lagarde has been speaking in Tokyo this morning, warning about the continuing downturn in the global economy and IMF downgrades.
She said: "In the last few months, the global outlook has been more worrying for Europe, the United States and large emerging markets."
The IMF will downgrade some of its economic forecasts later this month as economic data from major and emerging economies has deteriorated in recent months, she added.
"The IMF's forecasts are likely to be lower than our previous forecasts."
Japan's Prime Minister Yoshihiko Noda said the eurozone crisis was unfairly hitting the yen.
He said: "Market jitters on eurozone problems, especially one-sided yen rises that do not reflect Japan's economic fundamentals, are inflicting severe damage on economic sentiment."
You can read Largarde's full speech here
8.28am: Here's today's agenda:
UK Producer Prices for June at 9.30am BST
Germany total industrial production for May at 11am BST
US employment report for June including non-farm payrolls, the unemployment rate and average hourly earnings at 1.30pm BST
The Bank of England publish the minutes from the latest Financial Stability Committee meeting
ECB Chair Mario Draghi, Italian Prime Minister Mario Monti and French Foreign Minister Laurent Fabius meet for and economic conference
Greece's parliament begin a three day dabate ending in a confidence vote in the new government on Sunday
Meanwhile, stock markets across Europe opened down
FTSE 100 down 47 at 12897
German DAX down 25 at 6511
French CAC down 17 at 3212
Spanish IBEX down 80 at 6875
Italian FTSE MIB down 75 at 14015
And bond markets, which had a decidedly rocky ride yesterday were also suffering
Spain's 10 year bond yield is up to 6.86%
Italy's 10 year bond yield is up to 6%
7.52am: Good morning and welcome to another day of action from the eurozone crisis. We will be bringing you up to date with the latest unravelling as we head into the weekend.
We are not expecting anything as exciting as yesterday, when we saw the Bank of England introduce QE3 - pumping in an extra £50bn, the European Central Bank reducing interest rates 25 basis points to 0.75%, and China surprising everyone by reducing interest rates for the second time in a month.
The FTSE 100 is expected to open down 0.3%, with Germany's Dax down 0.5% and France's Cac off 0.8%. The oil price has fallen back below $100.
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