Wednesday, November 28, 2012

Higher markets on hopes for budget deal

Dow jumped 106, advancers over decliners more than 3-2 & NAZ was up 23. The Financial Index rose a fraction, going above 210. The MLP index was up 2+ to 396 & the REIT index lost a fraction in the 257s. Junk bond funds were mixed while Treasuries gained. The price of oil dropped as traders look for signs of progress in negotiations over US budget issues. Gold fell the most in 3 weeks as pessimism on a US budget resolution eroded demand for commodities.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month	0.091%
U.S. 2-year	0.258%
U.S. 10-year	1.614%

CLF13.NYM

...Crude Oil Jan 13

...86.45

...

0.73

(0.8%)

The EU is quarreling over thresholds on how big euro-area lenders must be in order to be designated for direct oversight by the ECB . Nations are at odds over 3 different size thresholds. Some countries are seeking to set the bar as low as banks with more than €2.5B ($3.2B) in assets, while others are calling for divisions at €20B or €60B. States are also split over having direct ECB supervision triggered by a ratio between a bank’s assets & the GDP of its home country. Suggested thresholds are assets of more than 20%, 50% or 75% of GDP. Govs are racing to meet an end of 2012 deadline to set up a single supervisor at the ECB. EU finance ministers will meet next week to seek compromises on the bank-oversight plan, which the bloc’s leaders have labeled as an essential step to break the bank-sovereign link that has worsened the euro debt crisis. Direct ECB oversight would automatically apply to any lenders with cross-border presence, under the draft plans. The ECB would have powers “at any time ” to sideline national regulators & take over direct supervision of any bank. The information is based on draft documents that were leaked to Bloomberg news. This is the same group that is trying to solve the euro debt mess.

EU Nations Clash on Thresholds for Direct ECB Oversight

Fed Says Economy Grew at ‘Measured’ Pace as Fiscal Cliff Neared

Photo: Bloomberg

A pickup in consumer spending & steady home sales helped lift economic growth in Oct & early Nov in most parts of the US, according to a Federal Reserve (FED) survey. The one exception was the Northeast, which was slowed by Superstorm Sandy. Growth improved in 9 of its 12 the FED regional banking districts. Growth was weaker in New York, Philadelphia & Boston, areas where Sandy caused widespread disruptions. The survey noted that growth improved despite nervousness about the "fiscal cliff." But manufacturing shrank or slowed in 7 regions & was mixed in 2 others. The Beige Book provides anecdotal information on economic conditions around the country from Oct thru Nov 14 & that will be used as the basis for the next policy discussion on Dec 11-12. The FED might announce plans to buy more Treasury bonds at that meeting to replace a program set to expire at the end of the year. The goal of the program is to lower long-term interest rates & encourage more borrowing & spending. The purchases would come on top of the FED mortgage bond buying program, which is intended to lower mortgage rates & make home-buying more affordable.

Fed Sees Measured Economic Growth as Fiscal Cliff Nears

Greece's debt buyback plan, a key element of the country's bailout deal, will be voluntary but must succeed, Finance Minister Stournaras said. In his first major news conference since a deal earlier this week to shave about €40B off the country's debt pile, Stournaras said the offer would be attractive to bond holders, but he declined to give details. "The buyback must succeed. It's our patriotic duty to succeed, it is important for the country's credibility," he said. Greece must conduct the deal by Dec 13, before it receives more than €30B in withheld bailout payments from the euro zone & the IMF. Greece might spend €10B from the euro zone's rescue fund (EFSF), which would allow it to buy around €30B worth of debt, cutting its outstanding obligations by €20B. But analysts have raised questions over whether it would attract enough interest from bondholders to deliver the promised savings & how it would be funded. Greek banks & pension funds hold nearly €30B of Greek debt, about half of the outstanding Greek bonds in the hands of private investors. This drama plays on.

Greece Says Voluntary Debt Buy Back Must Succeed

Stocks had a good day on vague word that fiscal cliff talks are making progress. However words are cheap. A willingness to give a little here & a little there is still a long way from a done deal. Then there would be the final outcome. Any deal is likely to make one side or the other (maybe both sides) unhappy. A successful deal should include an increase in the debt ceiling. After all, that last time that happened (last year), the result was today's fiscal cliff mess. Dow had a good gain, but failed to crack thru 13K & NAZ remains below 3K.