European investors eye critical US payroll data

    • Triple rate cuts fail to lift markets
    • US Payroll report disappoints: worst Q2 for new jobs in two years
    • IMF warns it will downgrade 3.5% global growth estimate
    • Spanish bond yields test 7% as Finland resists EU bond buying plan
    • German schatz trades with negative yield in defensive market
    • Britain's Serious Fraud Office says it will investigage "Libor Matter"

1530 BST: Weakening into the close

Everything's falling lower into the close but thankfully the pace of declines isn't accelerating even after the limp payroll data from the United States. We're looking at a one-week low for the FTSE Eurofirst 300 after a 0.9 percent decline today and a 0.7 percent drop for Britain's FTSE 100.

The Euro is holding on - barely - about $1.23 against the Greenback and the pound is trading at just a tick or two over $1.55.

1430 BST: Eerie echo

Many point to the BNP Paribas freezing three of its investment funds in the summer of 2007 as the "starter-pistol" moment in the global credit crisis. This afternoon's news is very likely *not* that level of significance, but it brings back bad memories nonetheless.

JPMorgan is reportedly halting investments into five of its funds in the wake of yesterday's rate cut (both lending and deposit) by the European Central Bank.

1415 BST: SFO to investigate Barclays

Britain's Serious Fraud Office says it has accepted the libor matter for investigation and will decide when it's probe is complete whether to bring criminal charges against those involved.

1405 BST: Dollar surge

The weak payroll data has ramped-up safe-haven flows into the US dollar, helping both the Euro and Sterling extend declines for the session. The European single currency is now trading at a 5-week low of $1.2340 against the Greenback while Sterling is marked at a session-low 1.5505.

Stocks around the region are also extending declines, with Spain's IBEX leading on the way down, falling 1.9 percent to a two-week low of 6,803.9.

1355 BST: Remember Greece?

With it's new government entertaining the Troika of lenders this week, Greece is hoping to gain enough confidence from officials from the EU, IMF and the European Central Bank to allow the release of around €31.5bn in funds linked to its last bailout. Reports suggest they're desperate for the cash: by late July the could be reduced to paying salaries with IOUs instead of Euros.

Today, a "senior Eurozone official" told Reuters that: "There will be no disbursement to Greece until the Eurogroup has determined the programme is back on track".

We'll wait with interest.

1330 BST: Weak NFP

Employers in the US added only 80,000 jobs last month, well shy of the Wall Street consensus for a 90,000-plus addition. Private sector payrolls grew by 84,000 according to the Bureau of Labor Statistics.

The jobless rate for June was unchanged from May at 8.2 percent, as was the labor participation rate at 63.8

1245 BST: Finland finished?

Lots of social media chatter this morning regarding an interview between Finland's Finance Minister, Jutta Urpilaianen and the Finnish daily Kauppalehti. She's reported to have told the paper that "Finland will not hang itself to the euro at any cost and we are prepared for all scenarios" suggesting Finland would rather exit the Euro itself if it was left with the responsibility of paying the debts of other currency partners.

1215 BST: New BoE rate-setter

Perma-dove Adam Posen, who leaves the Bank of England and the Monetary Policy Committee in September to return to his native United States and the Peterson Institute, will be replaced by Ian McCafferty, at present the chief economic adviser to the Confederation of British Industry.

1130 BST: Spain past 7 percent

Benchmark Spanish 10-year bonds have slipped past 7 percent this morning as investors dump the debt in favour of core European bonds from France and Germany. French 10-year bond yields are now trading only 1 percent higher than German bunds, the narrowest "spread" since mid-March.

0930 BST: UK producer prices

Output prices at the factory gate fell -0.2 percent in June from the previous month to the lowest level since January 2010. Input prices plunged -2.2 percent in the same time-frame, the steepest decline since Septebmer 2009. Both figures benefited from the biggest one-month decline in global crude oil prices since December of 2008.

0840 BST: Italy next?

As Italian benchmark bond yields rise past 6 percent again this morning - erasing all of the benefit gained from last week's "game changing" European Leaders' Summit - investors are once again focusing on Italy as the next potential piece in Europe's financial market jenga. Here's a snippet from a research note published this morning from Nomura's European economics team of Alastair Newton, Jens Sondergaard and Stella Wang

Prime Minister (Mario) Monti was quick to blame the renewed financial market turmoil on recentdevelopments in Spain, which have increased risks that the Spanish government will neednot just a banking bailout but also a financing package for the sovereign. While Italy doesnot have the same banking sector problems as Spain, its high government debt level in a(very) low growth environment leaves Italy very exposed to sudden changes in marketsentiment. Markets are understandably fearful that in the event of a full-blown Spanishbailout, Italy will be next in line for a bailout. And after a Spanish bailout, there will not beany firepower left in the EFSF/ESM arsenal to backstop Italy.But the reason behind higher Italian sovereign risk is not only Spanish contagion fears, inour view. Investors are also unsettled by a very weak growth outlook, potential fiscalslippage and more political uncertainty that is set to push Italian sovereign debt onto anunsustainable trajectory.

0825 BST: Lagarde warns on global recovery

International Monetary Fund chief Christine Lagarde continues her world finger-wagging tour with a stop in Japan, where she expressed concern for the deterioration in the global economic recovery: "In the last few months, the global outlook has been more worrying for Europe, the United States and Emerging markets," she noted, adding that IMF growth forecasts are likely to be revised lower as a result.

0805 BST: Starting in the red

European shares dip in the first minutes of trading with the FTSE Eurofirst 300 falling around 0.2 percent to 1,042.27. We're seeing similar declines for Britain's FTSE 100 and slightly more aggressive declines in Spain (-0.6 percent) and Italy (-0.4 percent). Germany's DAX is down around 0.4 percent

Spanish and Italian bond prices are also falling, pushing benchmark 10-year yields on Italian debt past 6 percent and Spanish 10-year bonds to 6.81 percent.

0750 BST: Good Morning!

European markets are set to open in the red after a weak session in Asia indicated global investors aren't yet convinced that policy makers are doing enough to support growth amid the worst of the European debt crisis. The broad regional MSCI Asia Pacific Index fell around 0.2 percent to 119.02 while the European single currency remained firmly fixed under $1.24 against the US dollar and headed for its worst week of 2012.

Financial bookmakers are calling for declines across Europe's major indices ahead of today's critical employment report from the US Department of Labor. Analysts are expecting the non-farm payroll portion to indicate an addition of between 90,000 and 105,000 jobs last month, far short of the 250,000 needed each month to regain the level of employment enjoyed prior to the collapse of Lehman Brothers in 2008.

Bond markets are up and running with a modest 8 tick advance for the September German bund future (143.20) and a dip below the zero percent yield threshold for the benchmark German schatz.