Monday, April 20, 2015

Markets surge on China stimulus

Dow soared 207, advancers over decliners 3-1 & NAZ climbed 35.  The MLP index jumped 4 to the 447s & the REIT index was fractionally higher in the 329s.  Junk bond funds were higher & Treasuries pullled back.  Oil was down pennies (but still up 12 from its lows earlier this year) & gold dipped below 1200 again.

AMJ (Alerian MLP Index tracking fund)

CLK15.NYM...Crude Oil May 15...55.41 Down ...0.33  (0.6%)

GCJ15.CMX....Gold Apr 15......1,194.60 Down ...8.30  (0.7%)

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Federal Reserve Bank (FED) of NY pres William C. Dudley said he’s relatively optimistic a growth rebound will warrant raising interest rates in 2015, though he’s “not reasonably confident right now” inflation will climb.  “I believe that the growth prospects for the U.S. economy over the remainder of 2015 will improve,” Dudley said.  “When, hopefully, the data support a decision to lift off later this year, it does not mean that U.S. monetary policy will be tight.”  FED policy makers last month were split over whether they would raise rates in Jun or later, a debate that occurred before disappointing payroll figures for Mar.  “It will be important to determine whether the softness in the March labor market report was temporary, or if it foreshadows a more substantial slowing in the labor market than I currently anticipate,” Dudley said.  “The timing of normalization remains uncertain because how the economy evolves is also uncertain.”  Most policy makers expect to raise the benchmark interest rate some time this year.  A recent run of weak data on housing, retail sales & industrial production has prompted some officials to say they are wary of raising rates too soon.  They want to see continue gains in the labor market & to have reasonable confidence inflation will rise towards the FED 2% goal before raising rates.  “I’m saying I think I will be reasonably confident in the future,” Dudley added.  “But I’m not reasonably confident right now.”  “While I am relatively optimistic about the growth outlook for 2015, I also must acknowledge that there are some significant downside risks,” Dudley added.

Greece & its creditors remained at loggerheads with time running out to unlock aid & avert a default.  The sides haven’t even set 2015 budget targets, let alone on policies to meet them.  Euro finance ministers said in Feb that a list of measures must be agreed on by the end of Apr.  The leaders want Greece to do more to revamp its debt-burdened economy, with progress to be reviewed on Apr 24.  European Commission VP Valdis Dombrovskis said that creditors might need to wait until mid-May to see what Greece can deliver.  Greek bonds fell as yields on 3-year notes rose 115 basis points to 27.9%.  With the country running out of cash, credit-default swaps suggested there is about an 84% chance of Greece being unable to repay its debt in 5 years, compared with about 67% at the start of Mar.  A default on the country’s €313B ($336B) of obligations & an exit from the euro would be traumatic for the currency area & plunge Greece into a major crisis, the ECB said.  Greek officials remained defiant over the weekend, saying the gov won’t betray its electoral promises & worsen the pain that came from previous austerity measures.  Greece has said it won’t cut wages & pensions, introduce new taxes or sell assets, Alternate Health & Social Security Minister Dimitris Stratoulis said.  Greece & its creditors of the IMF, the ECB & the EU are still far from agreeing reforms needed to unlock tranche aid, IMF said.

Greece and Its Creditors Are at Loggerheads

China's central bank will inject more than $60B from nation's foreign-exchange reserves into 2 state policy banks.  According to leakers, the People's Bank of China would inject $32B into the China Development Bank & $30B in the Export-Import Bank of China.  The funds would be from the nation's forex reserves, which are managed by an arm of the central bank & stood at $3.7T at the end of Q1.  The move would make China's central bank the 2nd largest stakeholder in the China Development Bank & the biggest in the Export-Import Bank.  Agricultural Development Bank of China, another state policy bank, would receive a fund injection from the Ministry of Finance.  This month, the State Council unveiled a plan to strengthen control over the 3 banks, emphasizing the policy nature of the 3 banks, in a bid to ensure their lending is more tightly coordinated with the country's policies at home & abroad.  China is trying to expand its influence in the region by stepping up trade & infrastructure investment in neighboring countries.  It has established a $40B Silk Road fund & backed a new development bank called the Asian Infrastructure Investment Bank to accomplish these aims.

China's PBOC to Inject $60B+ into Two State Banks

Stocks are flying high on stimulus moves in China.  It's hard to believe that the news deserves such a large increase in stock prices, but that's the way it is.  Increased interest rates in the US are near & solving the Greek debt mess looks to be hopeless.  Dow is back over 18K (again) & for the time being has its eyes on setting a new record.  But it needs to add 200+ for a record & that has been a tough nut to crack 

Dow Jones Industrials

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