Monday, December 29, 2014

Markets little changed after Greek elections announced

Dow inched up 2, advancers ahead of decliners 3-2 & NAZ lost 1.  The MLP index rose 1+ to 461 & the REIT index went up 1+ to 334.  Junk bond funds were mixed to lower & Treasuries advanced.  Oil advanced amid speculation that an escalating conflict in Libya may pare a global surplus that’s driven crude into a bear market while gold drifted lower.

AMJ (Alerian MLP Index tracking fund)

CLG15.NYM...Crude Oil Feb 15...55.30 Up ...0.57 (1.0%)

GCF15.CMX...Gold Jan 15......1,188.50 Down ...6.60  (0.6%)

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Greece's descent into political crisis is threatening the country’s financial system.  The ECB, already battling the risk of euro-area deflation, may soon have to decide whether to withdraw much of its funding for Greek lenders.  Special rules on Greek assets accepted as collateral will become invalid if snap elections prevent the country from agreeing to a replacement for its bailout program by the end of Feb.  The prospect of renewed Greek turmoil is reviving memories of the euro-area debt crisis, which started in the southern European nation in 2009 & spread until it threatened the survival of the single currency in 2012.  The regional economy has struggled to recover since then, prompting the ECB to take unprecedented stimulus measures that may extend to quantitative easing as soon as next qtr.  The yield on the 10-year Greek bond jumped after the vote was announced in parliament, climbing 104 basis points to 9.52%, the highest since Sep 2013.  Greece’s path forward was set today when Prime Minister Samaras failed in his 3rd & final attempt to get his candidate for the country’s presidency, Stavros Dimas, confirmed by lawmakers.  With the constitution dictating that parliament must now be dissolved, Samaras said he will ask for elections to be held on Jan 25.  That’s a few weeks before the country’s €240B ($293B) bailout program expires.  “It’s now for the Greek electorate to decide about the future composition of the parliament and the government,” the ECB said.  “We will not interfere in or comment on this democratic process.”

Greek Election Puts ECB Funds at Risk as Crisis Memories Revived

After a rocky start to the holiday shopping season, US retailers benefited from cheaper gas prices & an improving job market in the weeks leading up to Christmas, raising optimism that sales reached a 3 -year high.  Customer Growth Partners President Craig Johnson now expects holiday sales to grow about 3.9%, a faster clip than he had previously projected as his “base case.”  The biggest payroll gains since 1999 & the lowest gasoline prices in 5 years are prompting consumers to spend more liberally.  The decline in gas prices, down 22% this month, could free up $3B in holiday consumption, Johnson said.  The money has largely gone toward hard lines, such as televisions, headphones & toys.  Retail sales between Thanksgiving & Christmas rose 5.5%, according to MasterCard Advisors, with jewelry & women’s clothing ranking among the strongest categories.  Johnson’s research showed that this season was the best in years for both consumer electronics & toys, helped by products like the iPhone 6.  The National Retail Federation has predicted that sales in Nov-Dec will gain 4.1%, the biggest increase since 2011.  Holiday sales had climbed 3.1% last year, when severe winter storms kept shoppers home at the end of the season.

Cheaper Gasoline Makes Christmas Merrier for U.S. Retailers

Russia's economy had its first decline since Oct 2009 last month as manufacturing & investment shrank when a currency rout pushed the ruble to a record low.  GDP shrank 0.5% in Nov from a year earlier after a 0.5% increase in Oct, the Economy Ministry said.  GDP fell 0.2% from the previous month on a seasonally adjusted basis after a 0.1% advance in Oct.  The economy of the world’s biggest energy exporter is facing its first recession since 2009 next year as oil, trading near a 5-year low, & sanctions imposed over Ukraine stoke the country’s worst currency crisis since 1998.  With oil prices  at $60 a barrel, the economy may contract about 4% next year, according to Finance Minister Anton Siluanov.  “A sharp slowdown in manufacturing had the main negative effect on GDP dynamics in November,” the ministry said.  Construction, wholesale trade & agriculture also remained negatively affected.  The Russia Manufacturing Purchasing Manager’s Index fell to 48.9 in Dec, the lowest since May, from 51.7 in Nov, according to a report by HSBC Holdings & Markit Economics.  A reading below 50 signals contraction.

Russian Economy Shrank in November for First Time Since 2009

Not much is going on as some traders are extending their holidays.  The MLP index is about even YTD after an unusually volatile time during the last few months.  But REITs are in demand with the index essentially at its multi year highs.  In the absence of a major news story, this should be a quiet week for the stock market.

Dow Jones Industrials

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