Monday, July 30, 2012

Markets fluctuate, awaiting developments in Europe

Dow was up 15, advancers ahead of decliners 4-3 but NAZ fell 5.  The Financial Index was about even in the 198s.  The MLP index rose 1 to the 394s & the REIT index was up 1 to the 267s.  Junk bond funds were mixed & Treasuries gained after the big sell-off on Fri.  Oil fluctuated as European economic confidence worsened in Jul amid speculation that European policy makers will act to resolve the region’s debt crisis.  Gold was also little changed.

AMJ (Alerian MLP Index tracking fund)

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Treasury yields:

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U.S. 2-year


U.S. 10-year


CLU12.NYM...Crude Oil Sep 12...89.93 ...Down 0.20  (0.2%)

GCQ12.CMX...Gold Aug 12....1,621.50 ...Up 3.50  (0.2%)

Get the latest daily market update below:

Euro-Area July Economic Confidence Declines More Than ForecastGE

Photo:   Bloomberg

Economic confidence in the euro area fell more than forecast to the lowest in almost 3 years in Jul, suggesting the economy’s slump extended into Q3 as govs struggled to tame the debt crisis.  An index of executive & consumer sentiment in euro area dropped to 87.9 from 89.9 in Jun, according to the European Commission (the lowest since Sep 2009).  The forecast called for a drop to 88.9.  Euro govs are striving to contain the debt turmoil, which has undermined confidence & last month forced Spain & Cyprus to seek external aid.  But Mario Graghi said last week that policy makers will do whatever is needed to preserve the euro.  The € has depreciated 7.4% over the past 3 months as Spain asked for as much as €100B ($123B) of bailout loans for its banks.  Fri, Moody’s cut the outlook on Germany’s Aaa credit rating to negative & said there is a risk that Greece could leave the € & an “increasing likelihood” countries such as Spain & Italy will require aid.  With govs seeking ways to plug budget deficits, the economy is edging toward its 2nd recession in 4 years.  German business confidence fell more than forecast in Jul to the lowest in more than 2 years & euro-area services & manufacturing output contracted this month.  Times are tough in  Europe.

Euro-Area Economic Confidence Drops More Than Forecast

  • <p>               Protesters gather outside Bank of Greece with the banner reads ''No'' in Athens, Monday, June 30, 2012.  The state-run bank was privatized last week, in a no-cash transfer to the private Piraeus Bank. Bank workers on Monday held a 24-hour strike to protest cuts under Greece austerity program. (AP Photo/Thanassis Stavrakis)
Photo:   Yahoo

The 3 parties in Greece's new coalition gov have resumed talks to decide on a major new package of budget savings demanded by rescue lenders as a condition for continued bailout financing.  Conservative Prime Minister Samaras will meet with coalition partners who have so far declined to sign off on Cabinet-level but cut proposals.  A gov spokesman refused to rule out new pension & salary cuts, saying "I cannot rule out anything that has not been decided. This €11.5 billion guarantees our access to far greater amounts of money ... So there is pressing need to come up with that 11.5 billion."  Debt inspectors from the EU, ECB & IMF also resumed meetings with gov officials to finalize the new austerity measures.  The gov spokesman said, "For two and a half years, we haven't made any (target). What we are striving to do with structural reforms is to create a simpler and more effective government."  But ATEBank's employees' association launched rolling 24-hour strikes to protest the deal.  The Greek Federation of Bank Employee Unions, OTOE, went ahead with a 24-hour strike to protest cuts made under Greek austerity measures.  And the Greek drama plays on.

Greek coalition government wrestles with new cuts AP

Italy has won a respite as it managed to borrow €5.48B ($6.75B) with key borrowing rates lower than they had been previously.  The Italian Treasury said the interest rates on its 5-year & 10-year bonds dropped in today's auctions.  The yield on the 10-year bonds fell to 5.96% from 6.19%, while the rate on the 5-year issue declined to 5.29% from 5.84%.  The amount raised was slightly less than the €5.5B sought & demand was a bit soft, with the offering only 1.3X oversubscribed.  Markets have grown increasingly hopeful over the past few days that Euro leaders are preparing more aggressive action to deal with the debt crisis that's ravaged the eurozone for over 2 years.

Italian yields drop in bond auctions AP

Markets are digesting the big gains from late last week.  Hopes were high, now it's time for officials to deliver.  Fri will bring the Jul jobs report & predictions are not optimistic. 13K has been an important ceiling for the last 6 months & remains a key barrier for the Dow to break thru in a convincing way.

Dow Jones Industrials

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