Monday, June 22, 2015

Higher markets on hopes for another Greek bailout

Dow gained 133, advancers over decliners 5-2 & NAZ added 41.  The MLP index went up 1+ to the 415s & the REIT index rose 1 to the 317s.  Junk bond funds were mixed to higher & Treasuries retreated.  Oil drifted lower on worries of increased supply (see below) & gold is back under 1200.

AMJ (Alerian MLP Index tracking fund)

CLN15.NYM....Crude Oil Jul 15...59.46 Down ...0.15  (0.3%)

GCM15.CMX...Gold Jun 15.....1,194.00 Down ...7.50  (0.6%)

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The Greek gov may have messed up one of its last chances to cut a deal with creditors by sending a reform proposal too late for today’s emergency summit.  Several versions of the proposal, in fact, were circulating so it took time to clarify which was the correct one.   Finnish Finance Minister Alexander Stubb said that both his counterparts & EU prime ministers “wasted a lot of air miles" traveling to Brussels for today's meeting.  As usual in the Greek debt saga, more meetings are being scheduled, including with heads of state, throughout the week.  The ECB has provided Greek banks with just enough extra liquidity to last until creditors have a clear picture of what Greece is proposing; a decision could be made Thurs at the regular EU summit, leaving little time for negotiations.  Unless Greece’s latest proposal is radically more detailed than previous ones, & offers major concessions on extra tax revenue & less pension spending, the country is headed for default & a euro exit.

The EC raised emergency funding for Greek lenders for the 3rd time in less than a week, according to a leaker.  The Governing Council increased the cap on Emergency Liquidity Assistance (ELA) in a telephone conference on Mon, & stands ready to reassess the liquidity of Greek lenders in a new call whenever needed.  The ECB’s decision to review ELA so soon is a signal to Greece that its situation is serious. Euro-area finance ministers are due to meet in Brussels today, followed by a summit of European leaders, as concern rises that talks on Greece’s bailout program will fail to avert a default.  A new proposal by Greek Prime Minister Alexis Tsipras drew a rare positive nod from officials, who indicated it could help break the months-long impasse.  The new offer “was a good basis for progress” ahead of the emergency summit, European Commission spokesman Martin Selmayr.  The Greek central bank received approval to increase ELA by €1.1B ($1.2B) to €84.1B on Wed, & by a further €1.8B on Fri.  ECB pres Mario Draghi said last week that liquidity will be extended to Greek banks as long as they are solvent & have sufficient collateral.  He also said the ECB is monitoring closely to see if those conditions change.

ECB to Raise Greek Bank Aid Third Time in Less Than a Week

Saudi Arabia, OPEC’s biggest member, is ready to produce more oil if demand rises, Oil Minister Ali-Al Naimi said on Thurs.  It has 1.5-2M barrels a day of spare capacity, he added.  Libya may double output to 800K barrels a day by next month, according to a spokesman for the state-run National Oil Corp.  Iranian Oil Minister Bijan Namdar Zanganeh presented a letter earlier this month urging OPEC to make way for his country to pump 4M barrels a day, back to the level of about 2008 before Western sanctions intensified.  Iran produced 2.8M barrels a day in May.  OPEC kept its production target at 30M barrels a day earlier this month, maintaining the strategy of defending its share of the global oil market rather than prices.  The group pumped 31.6M barrels a day in May.  In the US, oil output will fall to 9.19M barrels a day from 9.59M last month, the Energy Information Administration (EIA) said.  Production will average 9.43M barrels this year, the most since 1972.  The number of rigs searching for oil dropped by 4 to 631 in the latest week, the lowest level since Aug 2010.  Daily production from shale formations such as North Dakota’s Bakken & Texas’s Eagle Ford will shrink 1.3% to 5.58M barrels this month, based on EIA estimates.  It’ll drop further in July to 5.49M, the lowest level since Jan.  US oil inventories fell for 7th time, to 468M last week. That’s still 80M more than a year earlier.  Supplies at Cushing, Oklahoma, the delivery point for WTI futures, increased for the first time in 8 weeks.

OPEC Oversupply of Oil Crowds Out U.S. Shale

Stocks are flying on a wing & prayer.  Buyers are praying there will be another Greek debt bailout, but nobody knows how this mess will play out.  There are plenty of deadlines coming up this week & it's a good bet that this confusion will drag on next week.  Meanwhile high yielding sectors like MLPs, REITs & are around lows not seen in months, even years, with the first interest rate hike by the Fed approaching.

Dow Jones Industrials

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