US stocks end at records, lead global equities higher

NEW YORK, United States — All three major US equity indices rose to fresh records Wednesday on solid earnings and higher oil prices, concluding a sunny session for global equities.

The Dow, S&P 500 and Nasdaq all ended at new peaks as investors shrugged off worries about Washington, where President Donald Trump’s agenda has languished amid opposition to his health care reform proposal.

Bourses in Europe were higher ahead of Thursday’s European Central Bank meeting. Tokyo, Hong Kong and Shanghai also all rose.

Earnings growth among companies in the S&P 500 has thus far been “much better” than expected, said Art Hogan, chief market strategist at Wunderlich Securities.

“That is helping the stock market and is the focus this week,” Hogan said.

Other elements that helped boost stocks included better-than-expected housing data and a bullish US oil inventory report that supported oil prices and boosted shares of petroleum-linked companies.

Maris Ogg, president of Tower Bridge Advisors, said sentiment has also been boosted by the improved outlook in Europe following the election of French president Emmanuel Macron as well as the recognition that Trump is a business-friendly president, even if his agenda looks uncertain.

“The market is recognizing we are in a pretty good environment and we are at the beginning of a cycle that could on for quite a while,” Ogg said.

Among US companies reporting results, Morgan Stanley surged 3.3 percent, but IBM and United Continental fell 4.2 percent and 5.3 percent after investors found fault with results.

Euro pulls back

The euro surged Tuesday to a near 15-month pinnacle at $1.1583, but pulled back to $1.1513 on the eve of the ECB.

ECB chief Mario Draghi has expressed greater confidence in the economy in recent weeks and analysts are looking for him on Thursday to continue to prepare the ground for an eventual shift away from easy-money policy later this year through a tapering of the bond purchases.

Still, Kathy Lien, managing director of BK Asset Management, said ECB officials have been unnerved by the rise of the euro of late and warned the central bank will want to avoid giving the currency a further boost.

“It is in their best interest to halt the one-way move, ease the euro off its highs by repeating that inflation is not on a self-sustainable path, and then gradually set expectations for taper from a lower base,” she said.

“That way… they could take the steam out of the rally.” CBB

source: business.inquirer.net

First Greek bank bailout cash could come before stress test – euro zone source

Greek banks could get a first capital injection soon after a bailout deal is agreed, as much as 10 billion euros, even before the European Central Bank completes a stress test, a euro zone official familiar with the issue said on Monday.

The official, who asked not to be named, said a bank test may not be finished before October but that it was recognized the Greek banks need urgent capital to normalize their operations.

So an initial sum may be allocated even before the ECB can assess the total of how much is actually needed.

The comments suggest that European officials are warming to Greek plans to get cash to banks as soon as possible and at the very latest before the end of the year.

Athens wants to ease capital controls, in place since June, which now limit withdrawals to 420 euros per customer per week.

It also wants to avoid having the recapitalization slip into 2016, at which time new EU regulations would require charges, or haircut, on large depositors, including companies.

The EU has suggested Greek banks may need anything from €10 billion to €25 billion, but the final amount is dependent on stress tests and an asset quality review. These tests will be accelerated, the source said.

Athens and international lenders are making unexpectedly quick progress in talks over an up to 86 billion euro bailout package, aiming to wrap up the deal this month and use the fresh money to repay a bond due to the ECB on Aug 20.

Another source said that the initial instalment must be sufficiently large to shore up confidence and a figure around 10 billion is seen making a psychological impact.

Greece's bank rescue fund injected €25 billion into the four main banks—National Bank, Piraeus, Eurobank and Alpha—in 2013 in exchange for shares, and last year they raised a further €8 billion from international investors. — Reuters

Trade deficit widens; weakness abroad fuels export drop

WASHINGTON  - The U.S. trade deficit widened in May, fueled by a drop in exports that could heighten concerns over weak overseas demand and a strong U.S. dollar.

The Commerce Department reported on Tuesday that the trade gap grew $1.2 billion to $41.9 billion. That was less than the $42.6 billion deficit expected by analysts and suggests Wall Street economists may slightly raise their forecasts for economic growth in the second quarter.

But the drop in exports in May highlights a change in the tenor of economic growth since the United States exited the 2007-2009 recession. The economy relied more on export-led industries such as manufacturing early in the recovery, but growth is increasingly coming from domestic drivers like construction and services as the economic cycle matures.

Exports fell $1.5 billion, or 0.8 percent, to $188.6 billion in May, led by a drop in overseas sales of U.S.-made capital goods. Imports fell by about $300 million, or 0.1 percent, to $230.5 billion.

Prices for U.S. Treasuries rose after the data, while U.S. stock index futures were unchanged. The dollar gained against a basket of currencies.

Since the middle of last year when the Federal Reserve made clear it was planning to raise interest rates to keep the economy from eventually overheating, the dollar has strengthened, making U.S. exports less competitive.

Since that time, Europe's economy also has been on shaky ground and the European Central Bank has eased monetary policy, causing the euro to weaken against the dollar. European policymakers are currently fighting a debt crisis in Greece that threatens to rip apart the continent's monetary union.

Exports of goods to Germany fell 6.0 percent in May from the prior month, according to non-seasonally adjusted figures. Sales fell 4.2 percent to France, 2.1 percent to Mexico and 3.0 percent to Japan.

The U.S. economy contracted at a 0.2 percent annual rate in the first quarter, hit by bad weather, a strong dollar, spending cuts in the energy sector and disruptions at West Coast ports.

Other economic data, including figures on hiring and consumer spending, have pointed to a rebound during the second quarter, and a firming domestic economy could encourage the Fed to raise rates later this year.

In May, the drop in imports came as purchases from China rose 9.5 percent. That could fan further criticism from U.S. manufacturers that Chinese firms are using a cheap currency and unfair subsidies to gain market share in America.

At the same time, U.S. net imports of oil fell to $5.8 billion in May, the lowest level since 2002.  — Reuters

Europe rejects Greek bailout extension after referendum shock

BRUSSELS, Belgium - Greece hurtled towards default and a possible euro exit Saturday after Europe responded to the leftist government's announcement of a surprise referendum by refusing to extend Athens's desperately needed bailout.

The most dramatic day in the five-month crisis saw long lines of people queuing at cash machines in Greece after the announcement by radical Prime Minister Alexis Tsipras, amid fears of a bank run and possible capital controls.

In Brussels, Greek Finance Minister Yanis Varoufakis had asked eurozone colleagues to stretch the aid plan for a few days past its June 30 expiry date and until after the July 5 referendum vote on a creditor reform plan, but they unanimously rejected his appeal.

The move leaves debt-laden Athens struggling to meet a crucial 1.5 billion euro IMF debt payment on Tuesday, putting Greece's place in the single currency at risk and threatening the entire post-war European project.

"The Greek government has broken off the process, has rejected the reform proposal and is now putting the question in a negative way to the Greek people, which is an unfair way of putting the question," Eurogroup president Jeroen Dijsselbloem told a press conference.

"Given that situation, I think we might conclude that however regretful, the program will expire Tuesday night," the Dutch minister said.

Underscoring Greece's perilous position in the currency union, Dijsselbloem said the other 18 eurozone finance ministers would now hold fresh talks without Greece present to discuss the "consequences" and "prepare for what's needed to ensure the stability of eurozone remains at its high level."

Greece fears ‘permanent’ damage

The Greek parliament will vote on whether to go ahead with the referendum at midnight  (2100 GMT), after an address by Tsipras.

The outspoken Varoufakis warned that the decision could permanently damage the single currency, formed in a bid to bring unity to a once fragmented continent.

"The refusal of the Eurogroup today to endorse our request for an extension of this agreement for a few days or a couple of weeks ...will certainly damage the credibility for the Eurogroup as a democratic union and I am very much afraid the damage will be permanent," Varoufakis said.

But he said he was "still fighting" for a deal, and insisted the radical leftist Syriza government would "honor the verdict of the Greek people" in the referendum.

A Eurogroup statement issued after the meeting said it was "supported by all members... except the Greek member."

Greece's negotiations with its international creditors that have dragged on since January, when Tsipras's Syriza party first took power on a promise of ending austerity after two EU-IMF bailout programs since 2010, worth 240 billion euros.

Syriza has repeatedly refused to make cuts to pensions and changes to the VAT system demanded by Greece's bailout monitors: the European Commission, European Central Bank and International Monetary Fund.

A week of intensive talks in Brussels ended with Greece's creditors on Friday offering Athens a five-month, 12-billion-euro ($13.4-billion) extension of its rescue program, on condition it committed to fresh reforms.

Germany's hardline pro-austerity finance minister Wolfgang Schaeuble said the Greek government had "ended the negotiations unilaterally" and rejected that offer.

ATM queues

The European Central Bank will now play a crucial role in ensuring Greece's banks have the cash to open on Monday, and two top Tsipras aides were meeting ECB head Mario Draghi in Brussels on Saturday.

The governing council of the ECB was also reported to be meeting on Sunday, and was "closely monitoring developments", the bank said.

Greece was stunned by the referendum announcement by radical leader Tsipras, which came just hours after he had been at a summit with European leaders in a bid to end the crisis.

"The people must decide free of any blackmail," the 40-year-old prime minister said in a televised address to the nation late on Friday.

"We were asked to implement austerity measures... allowing the deregulation of the labor market, pension cuts, and an increase in VAT on food products, targeting the humiliation of an entire people," Tsipras said in his address.

Queues built up at cash machines in Athens. In Greece's second city, Thessaloniki, some banks have run out of money, according to an AFP reporter, while a National bank branch had a queue of 50 people.

"I have a shop. I came to the bank to withdraw as much money as I can in order to cover the needs of my shop for next week," 42-year-old Maria Kalpakidou told AFP.

Demand at petrol stations was also said to have "heightened" but there were no fuel shortage problems, according to state news agency ANA.

Draghi has been keeping the Greek banking system alive with near-daily cash infusions as it is frozen out of the capital markets.

The Eurogroup will now discuss worst case scenarios, ranging from a Greek default next week to a possible exit from the eurozone and even, as suggested by the Greek central bank, the 28-nation European Union. — Agence France-Presse

source: gmanetwork.com

Data, ECB move support shares, Ukraine eyed

NEW YORK - U.S. stocks rose in early trading on Thursday, with the S&P 500 at a fresh record intraday high following upbeat labor market data, while traders kept an eye on developments in Ukraine.

In a boost to riskier assets, the euro hit its highest against the U.S. dollar since late December after the European Central Bank kept interest rates on hold, shaking out bets of a cut in rates.

Crimea's parliament voted on Thursday to join Russia and its Moscow-backed government set a referendum for March 16 on the decision, in an escalation of the crisis between Russia and the West over the Ukrainian Black Sea peninsula.

Moscow stocks lost more than 2 percent after the vote in Crimea but pared the losses and were down 1 percent. The ruble weakened 0.4 percent versus the U.S. dollar. A U.S.-traded Russian ETF fell 0.6 percent to $23.52.

"Nobody wants to go to war and Russians don't want to get their market cut in half, so that eventually has to settle down," said John Manley, chief equity strategist at Wells Fargo Funds Management in New York. He said the call for a referendum can be seen as a cooling in the crisis as politics prevail over a possible armed conflict.

European Union leaders were set to warn, not sanction, Russia. U.S. President Barack Obama ordered the freezing of U.S. assets and a ban on travel into the United States of those involved in the Russian military intervention in Ukraine.

Weekly applications for U.S. unemployment insurance fell to 323,000, the lowest in three months, a sign of strength in a labor market that has been hobbled by severe weather. New orders for U.S. factory goods, however, fell more than expected in January and shipments also slipped, adding to signs of a recent slowdown in manufacturing activity.

"Indicators have been so subject to distortion that you have try to find the explanation that makes the most amount of sense," Manley said.

"The basic fundamentals for the market are okay. Constraints that the weather imposed are temporary."

The Dow Jones industrial average rose 74.33 points or 0.45 percent, to 16,434.51, the S&P 500 gained 5.61 points or 0.3 percent, to 1,879.42 and the Nasdaq Composite added 6.026 points or 0.14 percent, to 4,364.

Stocks in the basic materials, financials and industrial sectors, often associated with strong economic fundamentals, led gains on the S&P 500.

Costco shares fell 3.1 percent to $112.90 after the warehouse club operator's quarterly profit fell 15 percent, missing analysts' estimates.

Shares of Staples dropped 15.5 percent to $11.33 after the largest U.S. office supplies retailer forecast a fall in sales and said it would close up to 225 stores in North America by 2015.  — Reuters

source: gmanetwork.com

European shares near 6-week lows before pivotal US data

London — European shares steadied around six-week lows on Friday pending jobs data which will give the latest clues on whether the US economy is strong enough to warrant an easing of equity-friendly stimulus.

After a year-long rally fueled by global central bank support, equity markets are getting increasingly concerned that the policy cycle could be turning, with the European Central Bank this week saying it is in no rush to launch fresh measures, while US Federal Reserve officials openly discuss when would be the right time to start scaling back quantitative easing.

The creation of more than the expected 170,000 US jobs in May could therefore provide the catalyst for stock market declines, while a very weak number may be a positive.

With so much riding on the data, investors were unwilling to move the market too far in either direction. The FTSEurofirst 300 was down 0.1 percent at 1,176.94 points at 1002 GMT after a volatile morning when it darted either side of the no-change line and held around six-week lows.

"The markets are quite nervous about it ... They need reassurance about QE to be stable, so a strong number would cause a disruption," said Hans Peterson, global head of investment strategy at SEB Private Banking.

Analysts at Bank of America Merrill Lynch estimate that payrolls would have to rise by over 250,000, followed by an eventual second quarter gross domestic product reading showing growth of around 3.5 percent, to spark an unwinding of QE as soon as September. In contrast, readings below 90,000 could pave the way for more stimulus.

"Over the very short run there might be some relief but the general theme is that ... we seem to be losing our mantra that central banks will help us all the way," said Gerhard Schwarz, head of equity strategy at Baader Bank, forecasting a correction of 10 percent or more into the third quarter.

SEB's Peterson said for a fresh leg higher, the market would need to shift from being supported by central bank stimulus to finding comfort in improving economic fundamentals - a shift from the current stance when bad data is 'good' for stocks:

"The market has to mature into a new trend and that mindset change will take time ... It's time be a bit more conservative."

Reflecting the more cautious mood, Thomson Reuters Lipper data showed U.S.-based funds pulling money out of European equities for a second week in a row, with an outflow of some $1.8 billion - the biggest weekly drain since late 2011. — VS, GMA News

source: gmanetwork.com