Friday, December 16, 2011

Markets waffle on Fitch warnings for European debts

Dow slipped 2, advancers ahead of decliners 3-2 but NAZ was up 14.  The Financial Index gained fractionally to 169+, sloshing around low levels it has gotten used to in the last few months.

The MLP index rose 1½ to the 374s & the REIT index was up 2 to the 223s.  Junk bond funds were higher & Treasuries rose, bringing the yield on the benchmark 10 year bond below 1.85%.  Oil is digesting recent losses & gold is getting used to sub $1600 prices.

AMZ   Alerian MLP Index

DJR   Dow Jones Equity REIT Index

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CLF12.NYM...Crude Oil Jan 12...94.14 ...Up 0.27  (0.3%)

Live 24 hours gold chart [Kitco Inc.]

Fitch affirmed France's top AAA credit rating, but warned it could downgrade 6 other nations that also use the €: Italy, Spain, Ireland, Belgium, Slovenia & Cyprus.  Fitch said France's credit grade is supported by the country's wealthy & diversified economy & noted that the conservative gov has adopted several measures to strengthen its finances.  It said, however, that France's debt is expected to rise to a peak of 92% of GDP in 2014.  As a result, the agency revised its outlook for France to negative from stable & indicated a slightly greater than 50% chance of a downgrade over a 2-year horizon.  Unless the eurozone debt crisis worsens significantly, Fitch expects no change in France's rating until 2013   In addition, Fitch warned it could downgrade other big economies, notably Italy & Spain.  It said that following last week's EU summit, it "has concluded that a 'comprehensive solution' to the eurozone crisis is technically and politically beyond reach."  It expects to complete the review of the 6 eurozone nations by the end of Jan, it is considering downgrading them one or two notches each.  Nothing new, but throwing more gasoline on the fire.  Not good for the markets.

France’s AAA Outlook Cut; Fitch Reviews Others

Swiss Join Global Suffering as Europe Crisis Ripples

Photo:    Bloomberg

Economic growth in Switzerland could grind to a halt next year as the franc’s appreciation & floundering global demand hurt exports. The economy is expected to expand 0.2% next year & 1.9% in 2013.  The country fears an escalation of Europe's debt turmoil, which is threatening the outlook in countries from India to the UK.  The Bank of England cut its growth forecasts last month, while India's central bank refrained from raising interest rates for the first time in 8 meetings, warning of an “uncertain global environment.”  Euro area exports fell 1.9% in Oct, led by declines in Germany & Spain.  S&P said that failure by European leaders to resolve the debt crisis “could lead to a more pronounced economic downturn.”  It also said that net exporting euro nations Holland, Germany, Belgium, Austria & Finland face a risk of a bigger contraction than net importers from “deteriorating external demand.”  The projected recession for Europe next year will be felt around the world.

Swiss Join Suffering as Europe Crisis Ripples

  • <p>               House Speaker John Boehner of Ohio, followed by  Rep. Greg Walden, R-Ore., strides into a GOP strategy session singing "Zip-a-Dee-Doo-Dah" on the morning after  lawmakers from both political parties came together on an 11th-hour deal to keep the government from shutting down, Friday, Dec. 16, 2011, on Capitol Hill in Washington.   (AP Photo/J. Scott Applewhite)
Photo:   Yahoo

The House passed a $1T+ budget bill for day-to-day operations of 10 Cabinet departments & averting a gov shutdown, while Senate talks on renewing a payroll tax cut & jobless benefits reached a critical phase.  The 296-121 vote represented a rare moment of bipartisanship in a polarized Capitol.  The Senate's top Rep, meanwhile, raised the stakes in the showdown over the payroll tax cut, insisting he won't back a compromise extension unless the bill includes language aimed at forcing construction of a Canada-to-Texas pipeline.  The GOP's pipeline demands added uncertainty to efforts to quickly reach a deal on a bill renewing payroll tax cuts & jobless benefits for the long-term unemployed.  This is high uncertainty & markets don't like that!

House passes $1T budget bill, avoids shutdown AP

ZNGA lost its zest after going public.  The stock finished down 50¢ to $9.50 on its first day of trading, another sign of a market that has lost its way.. 

ZNGA   Zynga

Dow fell more than 300 this week, taking its month to date results to minus 200+.  However the markets have been hit with an abundance of dreary news & have taken it reasonably well.  Memories of 3 years ago are still in my mind, although that was a far grimmer situation.  Bailout III, whatever, for Europe does not seem to be an option which means European news stories will have a strong negative bias.  The US doesn't look all that great, especially with the goings on in DC which affects us all.  The 12K ceiling for the Dow has held & should continue to hold for the balance of the year, if not longer.

Dow Jones Industrial Average

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