Thursday, April 16, 2015

Markets waffle on concerns about Greek debt refinancing

Dow rose fell 6, decliners over advancers 5-4 & NAZ lost 3.  The MLP index continued its recent rise, up 1+ to the 446s, & the REIT index rose 1+ to 331.  Junk bond funds were mixed & Treasuries gained today.  Oil rallied in the PM, pushing higher in the 56s, & gold slid below 1200 again.

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Most economists now expect the Federal Reserve's first rate hike in almost a decade to come at its late-summer meeting.  The share of economists projecting the Fed will wait until Sep more than doubled to 71%, from 32% last month.  Team Jun shrank to 12% from 45% in Mar.  The camp calling for a Jul rate hike fell to 5% from 12%.  The shift in expectations probably will color commentary by 4 members of the FOMC later today.  A spate of disappointing data between the 2 surveys showed the US economy stalled a bit in Q1 as a harsh winter slammed consumer spending & manufacturing.  Payrolls increased by a measly 126K in Mar, falling below 200K for the first time in more than a year.  The Institute for Supply Management's index showed factories last month expanded at the slowest pace since 2013.  Economists now see the economy growing at a 1.4% annualized pace in Q1, compared to a forecast of 2.2% in the Mar survey.  The Fed also lowered its expectations this year.  The economy probably will grow between 2.3%-2.7% in 2015, down from as much as 3% in their Dec estimates.

Economists Have Moved Back Their Fed Rate Hike Guesses in Droves

Greece’s bonds tumbled, pushing 10-year yields to the highest in more than 2 years, as pressure mounted on the nation to secure funding or risk a possible default.  The price of Greece’s 3-year notes dropped the most since Feb & Greek corp bonds also slumped.  Credit-default swaps suggested there was a 79% chance of the country being unable to repay its debt in 5 years.  The gov is facing a financing crunch that Germany’s Finance Minister says isn’t likely to be resolved before a meeting of euro-area lawmakers next week.  Officials from the country told their creditors earlier this month they might run out of money & could miss a repayment to the IMF, according to 3 leakers.  Funds may be exhausted by May 12, when money is owed to the IMF, S&P said yesterday, as it downgraded Greek debt.  At stake is the country’s €313B ($336B) of gov debt.  In the first 2 weeks of May, Greece must make payments to the IMF of €200M & almost €800M.  It’s due to pay almost €200M of interest on privately held bonds tomorrow.  The nation’s 10-year yields rose to 13.2%, the most since Dec 2012.  That's still well below the 44.2% reached during the debt crisis in 2012.

Greek Pressure Builds as Bond Yields Climb to Highest Since 2012

IMF Managing Director Christine Lagarde warned that she wouldn’t let Greece skip a debt payment to the lender, shutting down a potential avenue to buy the Greek gov some financial leeway.  “We never had an advanced economy actually asking for that kind of thing, delayed payment,” Lagarde said.  “And I very much hope that this is not the case with Greece. I would certainly, for myself, not support it.”  Greek officials told their creditors earlier this month that they might run out of money & miss a repayment to the IMF.  The payment went thru, & Greece’s warning was seen as just an element of the ongoing discussion.  Greece must pay the IMF roughly $1M next month.  Missing a payment would put Greece in a club that includes Zimbabwe, Somalia & Sudan.  Lagarde said the IMF hasn’t allowed a country to delay a debt payment in 30 years.  One source said Finance Minister Yanis Varoufakis inquired this month during talks with the IMF what would happen if Greece missed a payment to the lender.  Varoufakis said that he never asked to be informed about the process of skipping a payment to the fund, saying such suggestions are outright lies.  Varoufakis met with Lagarde today.  Talks on resolving Greece’s financial crisis must “intensify” if euro-region finance ministers are to be able to assess the country’s reform commitments when they meet at the end of next week, the European Commission said.  “At this stage, we are not satisfied with the level of progress,” a spokesman for the EU's executive said.  “Everything is now on the table and what we need is to progress swiftly.”  Greece has not yet produced the “full list of reforms” demanded by EU leaders at a summit last month.  The proposals must be assessed by the European Commission, the ECB & the IMF before the country can get any additional payments from its bailout loan.  German Finance Minister Wolfgang Schaeuble ruled out further concessions to Greece, saying it’s up to Prime Minister Alexis Tsipras’s gov to commit to the reforms needed to release aid rather than give false hopes to its people.  “Despite the cacophony and erratic leaks and statements in recent days from the other side, I remain firmly optimistic that there will be an agreement by the end of the month,” Tsipras said today.  “Because I know that Europe has learned to live through its disagreements, to combine its parts and move forward.”  Along with the intl pressure, Tsipras is facing the first signs of domestic discontent with his gov.  About 4K miners & their families descended on Athens over a plan to possibly revoke the license of a gold mine in the north of the country, which would halt investment in the project.

Lagarde Won’t Give Support to Greece Missing IMF Payment

There was a touch of buying in the PM, then a little selling into the close.  Overall, the averages remained close to break even all day.  Greek debt refinancing doubts overhang the stock market.  The increase in yields on Greek debts tell the story.  Markets are very nervous.  Some think the eurozone is better able to handle a default or exit by Greece from the eurozone.  But nobody knows.  With more that half the month over, earnings will start coming from industrial & service businesses.  They may be dreary.  However, that could give the Fed reason to delay interest rates hikes.  That's always a plus for the stock market, short term.

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