Monday, June 25, 2012

Markets tumble again on growing worries over euro debts

Dow sank 148, decliners over advancers 5-1 & NAZ dropped 48.  The Financial Index fell 4 to the 189s & may be headed for its monthly low of 180.  The MLP index was off a very big 4½ to the 359s (near its monthly lows in the low 350s) & the REIT index dropped 2+ to 250.  Junk bond funds fell & Treasuries rose with the sell-off in stocks.  Oil followed stocks lower, but gold found a little support as a safe haven investment.

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CLQ12.NYM....Crude Oil Aug 12...78.84 ....Down 0.92  (1.2%)

GCM12.CMX...Gold Jun 12.......1,566.00 ...Up 1.50  (0.1%)

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Greece Seen Blocked From Debt Markets Until 2017

Greek Central Bank
Photo:   Bloomberg

Greece may need to wait at least until 2017 before it can sell bonds to investors.  A new gov & signs that EU is willing to loosen Greek austerity measures failed to convince traders that the country will be able to return to the market before its 2nd bailout ends in the next 3 years.  Greece last sold bonds in Mar 2010 before the extra yield that investors demand for holding its 10-year securities instead of German bunds ballooned the next month to 443 basis points.  That forced the country, facing €8.5B ($10.7B) of bond repayments, to start bailout talks with the EU, the ECB & IMF.  Currently 10-year Greek debt yield an enormous 25.72% more than German bunds.  Antonis Samaras was sworn in last week as prime minister, Greece’s 4th since Nov, after his New Democracy party won the vote.  But he is under pressure to tackle the nation’s debt crisis with the economy in a 5h year of recession & unemployment at 21%.  It may need a 3rd bailout or another round of bond writedowns (or both) to get debt to a manageable level. This situation is as ugly as it has been in recent years.

Greece Seen Blocked From Debt Markets Until 2017: Euro Credit

Merkel Backs Debt Sharing in Germany Amid Closer EU Union Push

Photo: Bloomberg

Chancellor Merkel's gov agreed to underwrite the debt of Germany’s states, backing a form of burden-sharing that she is resisting at the euro-area level to combat the financial crisis.  The federal gov dropped its opposition to a form of shared debt sales to help the states escape a deficit squeeze & meet constitutional limits.  The 2 layers of gov plan their first joint debt sale in 2013, the gov said yesterday.  Merkel’s coalition backed down in a deal the opposition said will help secure ratification of the EU’s fiscal pact in Germany.  With EU leaders due to discuss further integration at a summit this week, the accord in Germany doesn’t mean the bloc’s dominant economy is ready to assume liability for the entire euro zone, the Finance Minister said.  German bonds rose, outperforming euro-area peers, as investors sought safety before this week’s EU summit, the 19th aimed at crisis resolution.  The aim of combined bond sales is to boost the sale volume, increase market acceptance through the federal gov participation & reduce costs.  This is more of we'll make it up as we go along.

Merkel Backs Debt Sharing in Germany Amid Closer EU Push

Americans bought new homes in May at the fastest pace in more than 2 years, suggesting a modest recovery in the housing market continues.  The Commerce Dept said that sales of new homes increased 7.6% in May from Apr to an annual rate of 369K homes.  That's the best since Apr 2010, the last month that buyers could qualify for a federal home-buying tax credit.  But even with the gains, the pace is less than half the 700K considered healthy.  Builders are slowing gaining confidence in the market & starting to build more homes.  Mortgage rates have plunged to the lowest levels on record, making home-buying more affordable.  And sales of previously occupied homes are much higher than the same time last year.  Each home built creates an average of 3 jobs for a year & generates about $90K in tax revenue.  The median price of a new home sold in May edged down 0.6% from the Apr to $234K.  But the price was 5.6% higher than last year.

Sales of New Homes in U.S. Increased to Two-Year High in May

Europe is not the only problem around the world.  China's growth is slowing which is felt everywhere.  India will now allow foreign investors to buy more securities to bolster demand for the rupee after it tumbled to a record low against the dollar.  Foreign investors will be able to purchase $20B worth of gov securities, up from $15B.  The European disaster is going nowhere & the US economy is soggy at best.  All this adds to investor uncertainty which brings on more selling.  Dow may test its monthly 12K low & that could be very soon.

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