Monday, March 25, 2013

Markets fluctuate after excitement over Cyprus bailout fades

Dow fell 45, advancers just ahead of decliners & NAZ was off 7.  The Financial Index was flattish in the 244s.  The MLP index shot up another 3+ to 350 for another record & the REIT index was up 1 to 284 (close to its multi year highs).  Junk bond funds gained & Treasuries were little changed.  Oil rose to a one-month high as Cyprus agreed with creditors on a bailout, reducing concern that Europe’s debt crisis will deepen.  Gold fell after the Cyprus deal was announced.

AMJ (Alerian MLP Index tracking fund)

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CLK13.NYM....Crude Oil May 13...94.75 .....Up 1.04 (1.1%)

GCH13.CMX...Gold Mar 13.......1,596.10 ...Down 10.10 (0.6%)

<p>               Protesters hold a banner during an anti- bailout rally outside of European Union house in capital Nicosia, Cyprus, Sunday, March 24, 2013. After failing for a week to find a solution to a crisis that could force their country into bankruptcy, Cypriot politicians turned to the European Union on Sunday in a last-ditch effort to help the island nation forge a viable plan to secure an international bailout. (AP Photo/Petros Karadjias)

Photo:   Yahoo

Cyprus secured a €10B ($13B) package of rescue loans in tense, last-ditch negotiations, saving the country from a banking system collapse & bankruptcy that could have destabilized the euro area.  "We've put an end to the uncertainty that has affected Cyprus and the euro area over the past week," said Jeroen Dijsselbloem (chair of the meetings of the eurozone's finance ministers).  In return for the bailout, Cyprus must drastically shrink its outsized banking sector, cut its budget, implement structural reforms & privatize state assets, he said.  The 2nd largest bank will be shut down immediately, with all bond holders & people with more than €100K in their bank accounts there facing significant losses.  The measures are likely to deepen the recession in Cyprus & lead to more job losses.  The country has been shut out of intl markets for almost 2 years.  It first applied for a bailout to recapitalize its ailing lenders & keep the gov afloat last Jun, but the negotiations stalled.  After a botched agreement last week, the ECB moved to focus leaders' minds, threatening to cut off crucial emergency assistance to the country's banks.  "It's not that we won a battle, but we really have avoided a disastrous exit from the eurozone," said Cyprus' Finance Minister Michalis Sarris.  "A long period of uncertainty and insecurity surrounding the Cyprus economy has ended."  Finance ministers accepted the plan after more than 10 hours of negotiations.  "We believe that this will form a lasting, durable and fully financed solution," said IMF chief Christine Lagarde.  But several national parliaments such as Germany must also approve the bailout deal, which might take another few weeks.  EU officials said they expect the whole program to be approved by mid-Apr.  Under the plan, its 2nd largest bank, Laiki, will be restructured & holders of bank deposits of more than €100K there will have to take losses.  Those losses may not be accepted by big depositors.

Cyprus Salvaged After EU Deal Shuts Bank to Get $13B

Spain’s Swelling Debt Seen Impeding Rajoy in Battle on Deficit

Photo:   Bloomberg

Prime Minister Rajoy's progress in curbing a deficit worsened by the cost of servicing Spain's swelling debt load will be revealed this week with the release of data on the country’s finances.  The Budget Ministry will tomorrow publish figures for Feb showing the central gov budget shortfall, which accounted for more than half of the nation’s deficit in 2012.  Data in the following days on mortgage loans, inflation & retail sales will also highlight the plight of the taxpayers financing those outlays.  Rajoy last week signaled the difficulty of his task in taming a deficit as he backtracked for the first time on his pledge to haul Spain out of a 6 year slump later this year.  He said the economy may face a worse recession than the 0.5% contraction he’d previously predicted for 2013.  In Jan, the deficit rose 35% from a year earlier to 1.2% of GDP as interest costs surged 11%.  Total public debt jumped 20% last year to reach 84% of output as the gov bailed out the nation’s banks, its municipalities & its pensions & jobless-benefit systems.  A reminder that all is not well in the euro zone.

Spain’s Swelling Debt Seen Impeding Rajoy Deficit Battle

Dell Says Blackstone, Icahn Offers May Be Superior to Founder’s

Photo:   Bloomberg

Dell plans to negotiate with Blackstone Group & investor Carl Icahn over new acquisition bids for the computer maker that rival an offer of more than $24B from investors led by founder Michael Dell.  DELL says a special committee of board members has determined the bids from buyout specialist Blackstone & Icahn could be superior to a proposal from Dell & Silver Lake Partners to buy the company for $13.65 a share.  Michael Dell said the company is willing to work with 3rd parties on alternate acquisition proposals.  Blackstone is proposing to buy the company for $14.25 per share & Icahn wants to buy up to 58% of Dell's shares for $15 each.  The situation is fluid & the stock rose 41¢ to 14.55.

Dell Says Blackstone, Icahn Offers May Be Superior

Dell (DELL)

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Buyers came out at the opening on the news about Cyprus.  Then 2nd thoughts brought back sellers.  As a result, Dow is back to where it was almost 2 weeks ago.  Maybe bulls are taking long holidays to enjoy their profits.  Disaster was avoided (maybe postponed is a better word) but problems with euro finances have not gone away.  Then there is earnings season which begins when Alcoa (AA), a Dow stock, reports Apr 8 after the close.  The Alerian MLP Index keeps flying, up a massive 65 TYD to new record levels.

Dow Jones Industrials

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