Thursday, July 16, 2015

Higher markets after ECB extends Greek debt bailout

Dow rose 33, advancers over decliners 3-1 & NAZ jumped up 46.  The MLP index lost another 2+ to the 397s (remaining near multi year lows) & the REIT index was up 2 to the 317s. Junk bond funds inched higher & Treasuries declined.  Oil & gold slid lower.

AMJ (Alerian MLP Index tracking fund)

CLQ15.NYM...Crude Oil Aug 15...51.79 Up ...0.38 (0.7%)

GCN15.CMX...Gold Jul 15.......1,145.10 Down ....2.10  (0.2%)

The ECB granted more emergency liquidity assistance for Greek banks after the country’s parliament agreed on reform measures & euro-area nations approved short-term funding, Mario Draghi said.  “Things have changed now,” he said at a press conference.  “We had a series of news with the approval of the bridge financing package, with the various votes in various parliaments, to begin with in the Greek parliament, which have now restored the conditions for a raise in ELA,”  The ECB step marks a turning point in Greece’s most recent debt crisis, potentially paving the way for shuttered banks to reopen after more than 2 weeks of closure & capital controls.  The Greek parliament just approved austerity measures that are a precondition for talks on an aid package of as much as €86B ($94B).  “We always acted on the assumption that Greece will remain a member of the euro area,” Draghi added.  “There was never a question.”  The ECB “substantially accommodated” the Bank of Greece’s request for funding, raising the limit by €900M.  The amount requested was accommodated in full, though “scaled to one week,” he said.  The ECB acted after euro-area finance ministers agreed in principle to extend a €7B ($7.6B) bridge loan. 

Draghi Says Greece’s Place in Euro Not Doubted; Raises Emergency Funding

Puerto Rico said one of its agencies failed to transfer funds to a trustee to cover an Aug 1 debt payment because the legislature didn’t appropriate the funds when it passed the budget last month.  It’s unclear whether the Public Finance Corp will make the $36M principal & interest payment on bonds maturing that day.  If it doesn’t, that would mark the first time Puerto Rico has defaulted on a debt payment & would come as the commonwealth seeks to negotiate with creditors to restructure $72B of obligations.  “In accordance with the terms of these bonds, the transfer was not made due to the non-appropriation of funds,” Melba Acosta, pres of the commonwealth’s Government Development Bank, said.  Last month, lawmakers included about $300M in the current budget to repay GDB debt.  The bank may be able to use the money to pay bondholders next month, though it would need legislative approval to do so.  The legislature is out of session until mid-Aug.  Debt of the Public Finance Corp, which has borrowed to help pay gov bills, traded on Jul 1 at 68¢ on the dollar, a record low.  Governor Alejandro Garcia Padilla last month directed island officials to create a debt-restructuring plan by Aug.30.  He said Puerto Rico cannot afford to repay what it owes.

Puerto Rico Misses First Debt Payment

Filings for US unemployment benefits declined last week for the first time in a month, heading back toward the lowest levels in more than a decade & signaling dismissals remain muted.  Jobless claims fell 15K to 281K from a revised 296K in the prior period, according to the Labor Dept.  The median forecast called for 285K.  Jobless claims can see-saw at this time of year as automakers shutter plants to retool operations for the new-model year, making it more difficult to discern the underlying trend.  Layoffs have held below 300K for 19 consecutive weeks, the longest streak since 2000 & a sign of a stronger labor market.  The 4-week average of claims, a less-volatile measure than the weekly figure, increased to 282K from 279K. The number continuing to receive jobless benefits dropped 112K to 2.22M in the latest week.  The unemployment rate among people eligible for benefits declined to 1.6% from 1.7%.

Jobless Claims in U.S. Decrease for First Time in Four Weeks

Extending the Greek bailout is giving a lift to the stock market.  However tech stocks are leading the way.  The Puerto Rican debt mess is lingering behind the Greek bailout.  It's too early to see if earnings are going to be a lift for the market.  But another mediocre GDP report may make it difficult to see many favorable corp earnings.

Dow Jones Industrials

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