Dow dropped 46, decliners over advancers more than 3-2 & NAZ pulled back 17 (below 5K). The MLP index fell a big 4+ to the 392s (another multi year low) & the REIT index rose 1+ to over 310. Junk bond funds were a little lower while Treasuries rose with increasing political uncertainty around the globe. Oil sank nearly 9% to the 52s (see below) & gold inched higher.
AMJ (ALerian MLP Index tracking fund)
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The Greek Prime Minister was given hours to come up with a plan to keep his country in the euro & stave off economic disaster as citizens suffer under a 2nd week of capital controls. Adding to the pressure, the ECB made it tougher for Greek banks to access emergency loans. Angela Merkel said “time is running out,” as she & French pres Hollande responded to the Sun referendum in Greece. Tsipras has all but run out of chances to reach a deal with creditors, who have insisted on tax hikes & spending cuts as the price for a new bailout of Europe’s most indebted nation. Greece’s economy is grinding to a halt, with bank closures extended thru Wed to stem deposit withdrawals. “It will be important tomorrow that the Greek prime minister tells us how this should move forward,” Merkel said in Paris. “The last offer that we made was a very generous one. On the other hand, Europe can only stand together, if each nation takes on its own responsibility.” Just after Merkel & Hollande met, the ECB maintained its lifeline to Greek lenders at the prior level, the equivalent of a drip feed. It also increased the haircuts on collateral pledged against emergency liquidity, raising the discount applied to reflect the dire economic situation. Greece today made a pre-emptive concession to creditors with the resignation of outspoken Finance Minister Varoufakis, who had clashed repeatedly with his counterparts from other countries. His replacement, Euclid Tsakalotos, will likely prove less combative in style, although he shares his predecessor’s opposition to austerity measures & has a deep background in Tsipras’s Coalition of the Radical Left (Syriza). Tsakalotos played a prominent role in the last round of debt talks, which ended abruptly on Jun 27 when Tsipras called the surprise referendum. Tsipras can now claim a strong domestic mandate to negotiate after the plebiscite, in which 61% voted “no” to the latest creditor proposals. The endorsement came even after banks had been closed for a week, causing widespread queues at cash machines as Greeks waited to withdraw a daily maximum of €60 each. Unless it finds a solution to its cash crunch, Greece could drift toward an exit from the euro area, an outcome that Tsipras & other European leaders say they want to avoid at all costs. Without funds to pay salaries & allow commerce to occur, the Greek gov could eventually be forced to issue IOUs or some other medium of exchange, which might gradually evolve into a parallel currency.
Growth at US service industries picked up in Jun from a more than one-year low, signaling steady improvement in the biggest part of the economy. The Institute for Supply Management’s non-manufacturing index increased to 56 from 55.7 the prior month (the weakest since Apr 2014). A gauge above 50 indicates expansion, & the estimate was 56.4. Sales & orders advanced last month for service providers such as retailers, restaurants & real estate firms that are enjoying a rebound a consumer spending. Further gains for these businesses that make up almost 90% of the economy are helping fuel an expansion beset by tepid capital investment & overseas markets. Arts & entertainment, real estate, & hotels & restaurants led the list of the 15 non-manufacturing industries that reported growth. Mining was among the 3 that contracted. “We’re starting to see this slow, steady and incremental growth month over month,” ISM said. The new orders gauge increased to 58.3 from 57.9 the prior month & the business activity index, which parallels the ISM’s factory production gauge, climbed to 61.5 from 59.5 in May. A moderate pace of economic growth after a Q1 setback is prompting service industries to slow the pace of hiring. The measure of employment dropped to 52.7, the lowest level since Jan, from 55.3 in May. Last week figures showed the ISM’s Jun manufacturing index reached the highest level in 5 months. A gain in orders indicated US customers are helping fuel factory demand, though stronger business investment will be needed to produce a more pronounced pickup. This report adds to evidence that household spending may be firming after weakness earlier this year as consumers put paychecks from newly gained jobs to use. Household purchases increased 0.9% in May, the biggest gain in 6 years, after rising 0.1% in Apr.
Oil prices tumbled their most in 3 months after Greece's rejection of debt bailout terms & China's rolling out of emergency measures to support its stock markets shook global markets. Adding to the pressure on oil, Iran & global powers were trying to meet a Jul 7 deadline on a nuclear deal, which could bring more supply to the market if sanctions on Iran are eased. The self-imposed deadline could be extended again. US crude has fallen 10% in all over 3 straight sessions & Brent over 7% in 2 consecutive days, the biggest rout since Jan. The slump brought oil out of its narrow trading band of the past 3 months, risking a deeper slide ahead. A dispute over UN sanctions on Iran's ballistic missile program & a broader arms embargo were among issues holding up a nuclear deal between Iran & 6 world powers. Iran is seeking to restore oil exports that have dropped from 2½M barrels per day in 2011 to about 1M bpd in 2014. Oil prices were also weighed down by signs that US shale drillers were returning to the field, as the rig count for oil rose last week for the first time since Dec. It is unclear whether the latest price decline will give drillers pause, though, as many oil producers had been counting on $60-65 a barrel prices to support new wells.
It could have been worse. There was some buying in US markets after a major sell-off before markets opened. Dow finished not far off the highs. But this remains an ugly situation where euro leaders are making it up as they go along. Adding to global troubles, oil may be heading back to test its lows in the mid 45s with the possibility of increased oil production from Iran & US oil shale. These are not times for timid investors.
Dow Jones Industrials
AMJ (ALerian MLP Index tracking fund)
| CLQ15.NYM | ....Crude Oil Aug 15 | ....52.81 |  ...4.12 | (7.2%) |
The Greek Prime Minister was given hours to come up with a plan to keep his country in the euro & stave off economic disaster as citizens suffer under a 2nd week of capital controls. Adding to the pressure, the ECB made it tougher for Greek banks to access emergency loans. Angela Merkel said “time is running out,” as she & French pres Hollande responded to the Sun referendum in Greece. Tsipras has all but run out of chances to reach a deal with creditors, who have insisted on tax hikes & spending cuts as the price for a new bailout of Europe’s most indebted nation. Greece’s economy is grinding to a halt, with bank closures extended thru Wed to stem deposit withdrawals. “It will be important tomorrow that the Greek prime minister tells us how this should move forward,” Merkel said in Paris. “The last offer that we made was a very generous one. On the other hand, Europe can only stand together, if each nation takes on its own responsibility.” Just after Merkel & Hollande met, the ECB maintained its lifeline to Greek lenders at the prior level, the equivalent of a drip feed. It also increased the haircuts on collateral pledged against emergency liquidity, raising the discount applied to reflect the dire economic situation. Greece today made a pre-emptive concession to creditors with the resignation of outspoken Finance Minister Varoufakis, who had clashed repeatedly with his counterparts from other countries. His replacement, Euclid Tsakalotos, will likely prove less combative in style, although he shares his predecessor’s opposition to austerity measures & has a deep background in Tsipras’s Coalition of the Radical Left (Syriza). Tsakalotos played a prominent role in the last round of debt talks, which ended abruptly on Jun 27 when Tsipras called the surprise referendum. Tsipras can now claim a strong domestic mandate to negotiate after the plebiscite, in which 61% voted “no” to the latest creditor proposals. The endorsement came even after banks had been closed for a week, causing widespread queues at cash machines as Greeks waited to withdraw a daily maximum of €60 each. Unless it finds a solution to its cash crunch, Greece could drift toward an exit from the euro area, an outcome that Tsipras & other European leaders say they want to avoid at all costs. Without funds to pay salaries & allow commerce to occur, the Greek gov could eventually be forced to issue IOUs or some other medium of exchange, which might gradually evolve into a parallel currency.
Greece Given Hours to Save Place in Euro
The ECB reckons Greece’s financial system can survive
until at least after the Tues summit of European leaders without an
injection of extra liquidity. The Governing Council may consider keeping the existing €88.6B ($98B) assistance in place long enough to judge if
Greece & its creditors can come any closer to agreeing on the
country’s debt financing. The council is due to hold a
conference call at 6PM local time. The ECB may consider evidence of how political discussions are
progressing, including a call of euro-region officials taking place
before governors are due to talk. Then the ECB’s
bank-supervision arm is scheduled to hold a telephone conference after
the Governing Council call. Following Greek voters’ landslide vote on Sun against bailout
terms offered by EU-led creditors, concern among ECB
governors that the country will ultimately default & leave the euro. At the same time, they have so far been unwilling to preempt
any political talks. Euro-area finance ministers will
convene tomorrow to prepare for the summit that will take place later on Tues.
ECB Said to See Greek Banks Coping to Wednesday Without More Aid
Growth at US service industries picked up in Jun from a more than one-year low, signaling steady improvement in the biggest part of the economy. The Institute for Supply Management’s non-manufacturing index increased to 56 from 55.7 the prior month (the weakest since Apr 2014). A gauge above 50 indicates expansion, & the estimate was 56.4. Sales & orders advanced last month for service providers such as retailers, restaurants & real estate firms that are enjoying a rebound a consumer spending. Further gains for these businesses that make up almost 90% of the economy are helping fuel an expansion beset by tepid capital investment & overseas markets. Arts & entertainment, real estate, & hotels & restaurants led the list of the 15 non-manufacturing industries that reported growth. Mining was among the 3 that contracted. “We’re starting to see this slow, steady and incremental growth month over month,” ISM said. The new orders gauge increased to 58.3 from 57.9 the prior month & the business activity index, which parallels the ISM’s factory production gauge, climbed to 61.5 from 59.5 in May. A moderate pace of economic growth after a Q1 setback is prompting service industries to slow the pace of hiring. The measure of employment dropped to 52.7, the lowest level since Jan, from 55.3 in May. Last week figures showed the ISM’s Jun manufacturing index reached the highest level in 5 months. A gain in orders indicated US customers are helping fuel factory demand, though stronger business investment will be needed to produce a more pronounced pickup. This report adds to evidence that household spending may be firming after weakness earlier this year as consumers put paychecks from newly gained jobs to use. Household purchases increased 0.9% in May, the biggest gain in 6 years, after rising 0.1% in Apr.
Service Industries in U.S. Expanded at Faster Pace in June
Oil prices tumbled their most in 3 months after Greece's rejection of debt bailout terms & China's rolling out of emergency measures to support its stock markets shook global markets. Adding to the pressure on oil, Iran & global powers were trying to meet a Jul 7 deadline on a nuclear deal, which could bring more supply to the market if sanctions on Iran are eased. The self-imposed deadline could be extended again. US crude has fallen 10% in all over 3 straight sessions & Brent over 7% in 2 consecutive days, the biggest rout since Jan. The slump brought oil out of its narrow trading band of the past 3 months, risking a deeper slide ahead. A dispute over UN sanctions on Iran's ballistic missile program & a broader arms embargo were among issues holding up a nuclear deal between Iran & 6 world powers. Iran is seeking to restore oil exports that have dropped from 2½M barrels per day in 2011 to about 1M bpd in 2014. Oil prices were also weighed down by signs that US shale drillers were returning to the field, as the rig count for oil rose last week for the first time since Dec. It is unclear whether the latest price decline will give drillers pause, though, as many oil producers had been counting on $60-65 a barrel prices to support new wells.
Oil Prices Sink on Greece and China Turmoil
It could have been worse. There was some buying in US markets after a major sell-off before markets opened. Dow finished not far off the highs. But this remains an ugly situation where euro leaders are making it up as they go along. Adding to global troubles, oil may be heading back to test its lows in the mid 45s with the possibility of increased oil production from Iran & US oil shale. These are not times for timid investors.
Dow Jones Industrials
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