Monday, May 11, 2015

Markets waver after April jobs report

Dow dropped 22, advancers slightly ahead of decliners & NAZ climbed 7.  The MLP index fell 3 to the 437s & the REIT index lost a fraction to the 323s.  Junk bond funds were mixed & Treasuries declined.  Oil & gold hardly moved today.

AMJ (Alerian MLP Index tracking fund)

CLM15.NYM...Crude Oil Jun 15...59.26 Down ...0.13  (0.2%)

GCK15.CMX...Gold May 15....1,190.50 Up ....1.40 (0.1%)

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Saudi Arabian Oil, the world’s largest oil exporter, is planning to spend $70-$80B on overseas acquisitions 5 investments during the next 5 years, according to 3 leakers.  The investment is part of the state-owned company’s target of spending $150B at home & internationally thru 2019.  Saudi Aramco will focus on Asia, particularly China & Korea.  Saudi Aramco is expanding in refining & petrochemicals & seeking to boost ties with Asia as part of its ambition to become both the world’s largest oil & chemicals producer by the end of the decade.  Last year, it bought a $2B stake in S-Oil Corp., South Korea’s 3d-largest oil refiner.  The company has joint-venture plants in China, owns stakes in refining businesses in South Korea, Japan & the US & markets its crude & refined products globally.  Aramco secured a $10B loan in Mar that could be used for acquisitions.  The oil company reduced its borrowing costs when it used the new $10B facility to replace a $4B, despite the drop in oil prices.

Saudi Aramco Said to Plan Spending $80 Billion Overseas

Greece’s ballooning debt load is casting doubt over the IMF's role in future bailouts.  The IMF typically needs debt to be sustainable to provide more funds and, with the economy faltering, Greece is heading in the wrong direction.  Creditors preparing for talks on Greece this week have just one positive scenario & 3 negative ones, the most extreme of which is that the gov starts paying employees in IOUs.  The European Commission forecast last week that the country’s debt will be 174% of GDP next year, 15 percentage points above the level projected in Feb.  And even that assumes Prime Minister Tsipras reaches a deal to get previously agreed aid flowing.  The projection means that if there’s an agreement, the Greek leader is still going to hit bureaucratic & political resistance to longer-term support.  While the euro area has denied debt relief to Greece & insisted Tsipras observe the terms of the existing bailout, the IMF has signaled its concern over the deterioration in the country’s finances.  As Greece’s chances of hitting the target recede, it makes it more difficult for the IMF to justify extending additional funds because it is prohibited by its own rules from lending to countries with unsustainable debts.  If the euro area concedes that the debt burden is not sustainable, that would add weight to Greece’s appeal for more debt relief, an offer that its creditors have dangled since 2012 as an incentive to make good on the terms of its bailout.  Greece could win a cut in its interest payment & an extension of its repayment period if it sticks to the deal & delivers a primary budget surplus.  The IMF's European dept, told euro-area finance ministers that Greece will need more concessions from its creditors to achieve a sustainable debt load as it gets further from the target.

EU’s Failing Greek Debt Plans Risks Split Among Creditors

Citigroup confirmed that it could plead guilty to an antitrust charge as part of a settlement with the Justice Dept over accusations that the bank's traders rigged foreign-exchange rates.  The bank also said that it is in "active discussions" with the Justice Dept over settling the foreign-exchange accusations.  Citi & other big banks have been accused of manipulating foreign-exchange trading to their own advantage, sometimes at the expense of clients, & a settlement with the Justice Dept had been expected.  This is the first time that Citi has acknowledged that it might plead guilty.  Citi & other banks settled with some British & US regulators in Nov over similar accusations, with Citi paying about $1B total to the UK Financial Conduct Authority, the Commodity Futures Trading Commission & Office of the Comptroller of the Currency in the US.  The banks didn't have to admit guilt in those settlements.  The stock was down pennies.  If you would like to learn more about Citi, click on this link:

Citi Could Plead Guilty in DoJ Forex Probe

Citigroup (C)

The rally on Fri while impressive was short lived.  The popular averages are hovering near record levels but there is no follow thru today.  Extending the bailout for Greece is stuck in neutral & shows no sign of resolution.  Earnings reports from retailers will be coming this week & next.  Prospects are uncertain, especially after the problems with GDP data in Q1.

Dow Jones Industrials

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