Dow inched up 2, advancers ahead of decliners 3-2 & NAZ was off a fraction. The Financial Index was even at 203. The MLP & REIT indices were each fractionally higher, junk bond funds were mixed to higher & Treasuries rose slightly. Oil was flattish & gold slipped back on speculation that the Federal Reserve will delay announcing stimulus measures amid signs the US economy is recovering.
French President Hollande returning from holiday, faces an economy that hasn’t grown in 3 qtrs, rising joblessness, a ballooning trade deficit & the task of coming up with a plan in the next few weeks to plug a budget hole of more than €30B ($37B) next year. The challenges may undermine the rally in French bonds that has allowed the country to sell bills at negative yields for the first time. During his first 100 days, the premium demanded to hold French 10-year debt rather than comparable German securities fell to the lowest in more than a year. That trend may be reversing. The French 10-year yield is at 2.06%, near the record-low of 2% reached 3 weeks ago & down from 2.89% on the last day before Hollande’s election on May 6. While the premium France pays over Germany to borrow for a decade fell below 60 basis points for the first time in more than a year on Aug 15, it has risen again to 73 basis points. Investors were lured by France’s stability relative to Europe's periphery & by Hollande’s consistent reiteration of his goal to cut the budget deficit to 4.5% of GDP this year & 3% next year from 5.2% in 2011. There are a lot of stories coming from Europe & most are not pretty.
Hollande Loses Bond Market Love as Growth Stalls: Euro Credit
Photo: Yahoo
Consumer confidence unexpectedly weakened in Aug to its lowest in 9 months as Americans turned more pessimistic about the short-term outlook. The Conference Board said its index of consumer attitudes fell to 60.6 from a downwardly revised 65.4 the month before. Expectations were for an increase to 66, the lowest level since Nov. Jul was originally reported as 65.9. "Consumers were more apprehensive about business and employment prospects, but more optimistic about their financial prospects despite rising inflation expectations," said Lynn Franco, director of The Conference Board Consumer Research Center. The expectations index tumbled to 70.5 from 78.4, while the present situation index edged down to 45.8 from 45.9. Consumers' labor market assessment was mixed. The "jobs hard to get" index eased to 40.7% from 41% but the "jobs plentiful" index also declined to 7% from 7.8%. Consumers were more concerned about price increases, with expectations for inflation in the coming 12 months climbing to 5.9% from 5.4%. Another reminder that this economy is just sputtering.
Photo: Yahoo
Spain's northeastern region of Catalonia, a hub of industry & business, said it will seek €5.02B ($6.29B) in aid from the central gov, adding to the country's financial troubles as it struggles to avoid needing a sovereign bailout. Catalonia became the 3rd region after Valencia & Murcia to solicit aid. Valencia said it will seek €3.5B & Murcia is to ask for up to €300M. Many of the 17 semi-autonomous regions are struggling with the recession, the country's 2nd in 3 years, following a real estate crash in 2008 that has pushed the unemployment rate to nearly 25%. Because the regions are unable to borrow on financial markets to repay their huge debts, they are being forced to impose severe cutbacks. When that is not enough, they must ask the central gov for help. Spain's regions have a combined debt of €145B & €36B must be refinanced this year. Catalonia owes more than €42B. The gov fund, which was set up in Jul to help rescue the regions, has €18B in capital, part from the national lottery. If more is needed, Spain's central gov will either have to issue debt at punishing rates or ask for a sovereign bailout from its fellow eurozone countries. Prime Minister Rajoy & European Council President van Rompuy both denied that Spain was in talks for such a bailout. "There are no negotiations," said Rajoy. However, neither of them denied the possibility that Spain will eventually need help. A bailout is coming.
Spain's Catalonia asks Madrid for financial help AP
As expected, very little is going on with so many away on holiday. Mario Draghi had to cancel his trip to Jackson Hole so he could spend more time trying to save Europe from another bailout. The weak reading on consumer confidence is disturbing. While the economy is stumbling to some degree, it might not be severe enough for the Federal Reserve to take new actions. Dow remains pretty much glued to 13.1K.
AMJ (Alerian MLP Index tracking fund)
Treasury yields:
U.S. 3-month | 0.096% | |
U.S. 2-year | 0.268% | |
U.S. 10-year | 1.633% |
| CLV12.NYM | ...Crude Oil Oct 12 | .............95.98 | ... 0.51 | (0.5%) |
| ZGQ12.CBT | ....Gold 100 oz. Aug 12 | ...1,668.20 | ... 4.30 (0.3%) |
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French President Hollande returning from holiday, faces an economy that hasn’t grown in 3 qtrs, rising joblessness, a ballooning trade deficit & the task of coming up with a plan in the next few weeks to plug a budget hole of more than €30B ($37B) next year. The challenges may undermine the rally in French bonds that has allowed the country to sell bills at negative yields for the first time. During his first 100 days, the premium demanded to hold French 10-year debt rather than comparable German securities fell to the lowest in more than a year. That trend may be reversing. The French 10-year yield is at 2.06%, near the record-low of 2% reached 3 weeks ago & down from 2.89% on the last day before Hollande’s election on May 6. While the premium France pays over Germany to borrow for a decade fell below 60 basis points for the first time in more than a year on Aug 15, it has risen again to 73 basis points. Investors were lured by France’s stability relative to Europe's periphery & by Hollande’s consistent reiteration of his goal to cut the budget deficit to 4.5% of GDP this year & 3% next year from 5.2% in 2011. There are a lot of stories coming from Europe & most are not pretty.
Hollande Loses Bond Market Love as Growth Stalls: Euro Credit
Consumer confidence unexpectedly weakened in Aug to its lowest in 9 months as Americans turned more pessimistic about the short-term outlook. The Conference Board said its index of consumer attitudes fell to 60.6 from a downwardly revised 65.4 the month before. Expectations were for an increase to 66, the lowest level since Nov. Jul was originally reported as 65.9. "Consumers were more apprehensive about business and employment prospects, but more optimistic about their financial prospects despite rising inflation expectations," said Lynn Franco, director of The Conference Board Consumer Research Center. The expectations index tumbled to 70.5 from 78.4, while the present situation index edged down to 45.8 from 45.9. Consumers' labor market assessment was mixed. The "jobs hard to get" index eased to 40.7% from 41% but the "jobs plentiful" index also declined to 7% from 7.8%. Consumers were more concerned about price increases, with expectations for inflation in the coming 12 months climbing to 5.9% from 5.4%. Another reminder that this economy is just sputtering.
Spain's northeastern region of Catalonia, a hub of industry & business, said it will seek €5.02B ($6.29B) in aid from the central gov, adding to the country's financial troubles as it struggles to avoid needing a sovereign bailout. Catalonia became the 3rd region after Valencia & Murcia to solicit aid. Valencia said it will seek €3.5B & Murcia is to ask for up to €300M. Many of the 17 semi-autonomous regions are struggling with the recession, the country's 2nd in 3 years, following a real estate crash in 2008 that has pushed the unemployment rate to nearly 25%. Because the regions are unable to borrow on financial markets to repay their huge debts, they are being forced to impose severe cutbacks. When that is not enough, they must ask the central gov for help. Spain's regions have a combined debt of €145B & €36B must be refinanced this year. Catalonia owes more than €42B. The gov fund, which was set up in Jul to help rescue the regions, has €18B in capital, part from the national lottery. If more is needed, Spain's central gov will either have to issue debt at punishing rates or ask for a sovereign bailout from its fellow eurozone countries. Prime Minister Rajoy & European Council President van Rompuy both denied that Spain was in talks for such a bailout. "There are no negotiations," said Rajoy. However, neither of them denied the possibility that Spain will eventually need help. A bailout is coming.
Spain's Catalonia asks Madrid for financial help AP
As expected, very little is going on with so many away on holiday. Mario Draghi had to cancel his trip to Jackson Hole so he could spend more time trying to save Europe from another bailout. The weak reading on consumer confidence is disturbing. While the economy is stumbling to some degree, it might not be severe enough for the Federal Reserve to take new actions. Dow remains pretty much glued to 13.1K.
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