Wednesday, July 2, 2014

Markets vacillate on ADP payroll data

Dow rose 20, decliners over advancers almost 3-2 & NAZ slid chump change.  The MLP index was off 3+ to the 523s following its enormous run in the last 3 months & the REIT index dropped 1+ to the 302s.  Junk bond funds edged lower & Treasuries lost ground.  Oil declined as Libya opens ports to export oil & gold inched higher, extending its gains in the last month.

AMJ (Alerian MLP Index tracking fund)

CLQ14.NYM....Crude Oil Aug 14....104.33 Down ...1.01  (1.0%)

Live 24 hours gold chart [Kitco Inc.]

Janet Yellen said there is no need to change current monetary policy to address financial stability concerns although she sees “pockets of increased risk-taking” in the financial system.  In a comprehensive salvo into the worldwide debate among central bankers over whether interest rates are a first-order tool to curb financial excess, Yellen came down against that idea & in favor of regulatory mechanisms.  “Monetary policy faces significant limitations as a tool to promote financial stability,” Yellen said today at the IMF.  “Its effects on financial vulnerabilities, such as excessive leverage and maturity transformation, are not well understood and are less direct than a regulatory or supervisory approach.”  Yellen said the “primary role” should fall to a macroprudential approach, a combination of multiagency oversight, attention to bank capital & liquidity, & regulatory pressure to create buffers against failure.

Yellen Says Rate Policy Shouldn’t Change Over Instability

Foreign ministers from Ukraine, Russia, Germany & France started talks in Berlin aimed at ending hostilities after pres Poroshenko ended a cease-fire & vowed to retake territory from separatists.  Angela Merkel reiterated a warning that pres Putin risks further sanctions from the EU if it doesn’t do more to rein-in pro-Russian rebels in Ukraine’s easternmost regions.  “We won’t ease off,” Merkel said.  NATO Secretary General Rasmussen said that “Russia’s actions threaten the peace and security we have built after the fall of the Berlin Wall.”  With the EU & the US considering expanding sanctions against Russia, Poroshenko ended the truce early yesterday, blaming pro-Russian insurgents for more than 100 violations in 10 days.  The separatists mounted 19 attacks overnight, targeting convoys, checkpoints & a military base in the Luhansk region.  Ukraine’s acting defense minister, Mykhaylo Koval, said there’s increasing evidence that Russia is tightening security along the frontier to prevent insurgents from crossing the border & even “liquidating” some seeking asylum.  Tonight’s talks will “try to reduce the tensions,” a spokeswoman for Russia’s Foreign Ministry said.  French Foreign Minister Fabius will push for a resumption of the cease-fire.

Ukraine Talks Convene in Berlin Amid Fighting in East

Rebels who helped decimate Libyan oil production by blockading eastern ports said the nation’s largest & 3rd-largest export facilities can ship crude again, in a gesture of support for the newly elected parliament.  Es Sider & Ras Lanuf, which have combined capacity of 560K barrels a day, will reopen today.  But Libya's state-run National Oil hasn’t been informed of the move, said Mohamed Elharari, company spokesman.  The 2 terminals would increase Libya’s crude-export capacity almost 5-fold.  The loss of the Libya’s oil production boosted the price of Brent, a benchmark for half the world’s traded crude to $111.54 a barrel.  Libya is now producing about 320K barrels a day, or about a 1/5 of its output before Qaddafi was overthrown in 2011, according to National Oil. 

Libyan Rebels Say Two Oil Ports Reopened After Blockade

Janet Yellen affirmed US borrowing costs will remain low, always encouraging for the bulls to hear.  The ADP report was helpful, but buyers went to the beach today.  The jobs number for Jun should be a non event tomorrow.  But trading will be even lighter than today as traders start their long weekends early.  Next week earnings begin with Alcoa (AA) Tues evening followed by big banks.  Those reports will give an indication of how earnings season will go.

Dow Jones Industrials

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