Monday, April 21, 2014

Markets crawl higher awaiting developments in Ukraine

Dow rose 26, advancers over decliners 5-4 & NAZ climbed 4.  The MLP index was up a fraction in the 483s & the REIT index was also up fractionally in the 289s.  Junk bond funds were mixed & Treasuries fluctuated amid growing tensions in the Ukraine.  Oil & gold did little.

AMJ (Alerian MLP Index tracking fund)

Treasury yields:

U.S. 3-month


U.S. 2-year


U.S. 10-year


CLK14.NYM...Crude Oil May 14...104.21 Down ...0.09  (0.1%)

GCJ14.CMX....Gold Apr 14.........1,288.10 Down ...5.30  (0.4%)

Manufacturing will take center stage in the global economic watch this week, with the US. projected to fare better than the rest.  Orders for American-made capital equipment such as computers & machinery probably climbed in Mar by the most in 4 months, according to recent estimates.  In the euro zone, a report may indicate factories are growing at a steady pace in Apr, while similar figures out of China will probably signal factories in the world’s 2nd-biggest economy are pulling back, though not as severely as in Mar.  German business confidence may have slipped in Apr, inflation in Australia at the start of 2014 probably approached the top of its central bank’s preferred range, & Brazil likely posted a current-account deficit in Mar.  Bookings for US durable goods, made to last at least 3 years, may have climbed 2% last month following a 2.2% gain in Feb.  Orders for non-military capital equipment excluding airplanes, which are considered a proxy on the outlook for business investment in such things as computers & machinery, increased 1%, the most since Nov.  A gauge of Chinese manufacturing are expected to rise in Apr to 48.3 from 48 a month earlier.  Euro-area manufacturing & services activity remained broadly unchanged in Apr.  A survey of purchasing managers by Markit Economics is expected to show the region’s preliminary Apr composite index was little changed at 53 compared with 53.1 in the prior month

Manufacturing Gains in U.S. as China Stalls: Global Economy

Russia accused the Ukrainian gov of failing to rein in extremists as escalating tensions threaten to undermine a diplomatic accord reached last week & stoke calls in the US for economic sanctions.  Ukrainian & Russian officials traded accusations about responsibility for attacks that killed 3 during the weekend.  Russian Minister Sergei Lavrov called on the US to hold the Ukrainian authorities accountable for observing the agreement signed in Geneva, which calls for all illegal groups to disarm & seized buildings to be returned.  With pro-Russian forces holding their ground in several eastern cities, skepticism is growing that the accord reached by Ukraine, the US, EU & Russia will ease the standoff.  The gov in Kiev has said Russia is behind the unrest, exploiting the situation to prepare an invasion.  VP Joe Biden arrived today in Kiev to offer support for Ukraine’s democracy, sovereignty & economy as the administration weighs the imposition of economic sanctions on Russia.  The US hasn’t seen progress that would prevent the next round of sanctions & a decision will be made in days.  Lavrov called on the US to avoid threats of sanctions, while brushing off accusations that Russian forces are involved in attacks Ukraine.  Russia is getting increasing requests to intervene in eastern Ukraine to protect the Russian speaking population, he said.

Russia Says Ukraine Failing to Halt Extremists Seeking Civil War

Chinese Premier Li Keqiang's plan to introduce deposit insurance is meant to comfort the nation’s savers as bad loans mount.  In the bond market, it’s fueling speculation he’s preparing to let some banks collapse.  Among lender bonds rated at or below AA, the extra yield investors demand to hold the 2022 securities of China Bohai Bank surged to an 11-month high of 245 basis points last week.  The premium on the notes due 2019 of Harbin Bank, a lender near China’s border with Russia, has jumped 41 basis points in the past year to 217.  “With the deposit insurance coming online, the government is signaling they may be willing to let some of the smaller banks default or be consolidated,” Li said.   Premier Li pledged last month to introduce protection for savers this year as he shifts toward letting the market set rates, a move that may push up borrowing costs for smaller lenders even as it forces them to pay higher interest to depositors.  Almost 1000 customers rushed to outlets of Jiangsu Sheyang Rural Commercial Bank on Mar 24 amid rumors the lender may go bankrupt.  The nation’s banking regulator has ordered some smaller lenders to set aside more funds to avoid cash shortfalls, after bad loans jumped to the most since the global financial crisis.  Failures of high-yield trust products have sparked investor protests, highlighting the potential for unrest deposit insurance would seek to preclude. 

Bank Defaults Seen as Dark Side of Deposit Vows: China Credit

After the 3 day weekend, stocks are not sure what to do.  Eastern Europe remains volatile & Russia is unconcerned about its deteriorating economy.  If nothing else, it is the #1 source of oil & will have a major influence on global markets.  The China situation is becoming more worrisome as the new leaders are not sure how to light a fire in the economy without wreaking havoc.  More earnings are coming this week.  Let's see what they have to say about global & US economies.

Dow Jones Industrials

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