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Markets Try to Reverse Losing Streak

September 26, 2013 by

The stock market rose on Thursday after positive data about the job market was released, with the Standard Poor’s 500-stock index and the Dow Jones industrial average snapping five-day losing streaks.

But the gains were limited as investors continued to worry whether Washington lawmakers would manage to avoid a government shutdown and a possible federal debt default.

Initial claims for unemployment benefits dropped last week near a six-year low, the Labor Department said, a development that could bode well for employers adding workers to their payrolls. The encouraging data on jobless claims comes just over a week before September’s employment report is due.

“If today’s number was a good number, that means when we see the job report on Oct. 4, that number ought to be pretty strong,” said Philip Orlando, chief equity market strategist at Federated Investors.

The Dow industrials rose 55.04 points, or 0.4 percent, to close at 15,328.30. The S. P. 500 gained 5.90 points, or 0.4 percent, to 1,698.67. The Nasdaq composite index picked up 26.33 points, or 0.70 percent, to 3,787.43.

Among notable gainers on the Nasdaq, Bed Bath Beyond rose $3.32, or 4.5 percent, to $77.54, a day after it reported a jump in its second-quarter profit.

After the closing bell, shares of Nike jumped $4.36, or 6.2 percent, to $74.70 after it reported a profit that exceeded analysts’ estimates. This was the first earnings report for the retailer as a member of the Dow. The stock ended the regular session up 2.1 percent at $70.34.

In the bond market, interest rates inched higher. The price of the Treasury’s 10-year note slipped 6/32, to 98 23/32, while its yield rose to 2.65 percent, from 2.63 percent late Wednesday.

Article source: http://www.nytimes.com/2013/09/27/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Stocks Stall, Wary of Fed Action and Budget Showdown

September 24, 2013 by

Uncertainty about the Federal Reserve’s next step and the potential for a budget showdown in Washington led stock markets to a mixed close on Tuesday.

By the end of trading, the Standard Poor’s 500-stock index was 0.3 percent lower, the Dow Jones industrial average was 0.4 percent lower and the Nasdaq composite gained just under 0.1 percent.

Investors initially celebrated when the Federal Reserve said last week it would refrain from cutting back its huge economic stimulus program. The $85 billion in monthly asset purchases by the Fed helped pump life into the economy and stock markets, but enthusiasm has waned as the reasoning behind the decision — that the United States economy is still weak — began to sink in.

Still, the central bank is still expected to scale back its purchases at one of its upcoming meetings — in late October, in mid-December or sometime early next year, so “tapering” is not off the table.

Tuesday’s data did little to cement expectations of when the Fed may act. A house price report from the Standard Poor’s Case-Shiller index and a consumer confidence survey from the Conference Board were a little softer than expected.

The approaching budget battle between the White House and Republican lawmakers also threw an element of uncertainty at markets. The government will reach its borrowing limit, or debt ceiling, by Oct. 1. If Congress does not raise that limit, the government will not be able to pay all its bills.

Republicans are demanding that any increase must result in expenditure cuts of an equal amount. President Obama is demanding a debt-limit increase with no conditions attached.

“The re-emergence of debt ceiling concerns, along with muddled central bank guidance, has helped to inspire caution rather than risk,” said Brenda Kelly, senior market strategist at IG.

In Europe, the FTSE 100 index of leading British shares closed up 0.2 percent at 6,571.46 while Germany’s DAX rose 0.3 percent to 8,664.60. The CAC 40 in France ended 0.6 percent higher at 4,195.61.

Asian stocks were mostly lower. Japan’s Nikkei 225 fell 0.1 percent, to close at 14,732.61 points. Hong Kong’s Hang Seng dropped 0.8 percent, to 23,179.04. Australia’s SP/ASX 200 shed 0.4 percent, to 5,234.20. South Korea’s Kospi fell 0.1 percent, to 2,007.10.

Trading elsewhere was muted. Among currencies, the euro was down 0.1 percent at $1.3481 while the dollar was flat at 98.80 yen. In the oil markets, a barrel of benchmark New York crude was trading 22 cents lower at $103.37.

Article source: http://www.nytimes.com/2013/09/25/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Rate Increase for Private Medicare Buoys an Uncertain Market

April 2, 2013 by Leave a Comment

Stocks rose on Tuesday, led by the health care sector after the government said it would alter payment rates for private Medicare insurers, and helped by data on factory orders that indicated the economy was steadily improving.

The Standard Poor’s 500-stock index and the Dow Jones industrial average closed at nominal highs, though the S. P. fell short of breaking above its milestone intraday high of 1,576.09.

The federal government dropped plans to cut payments for private Medicare Advantage insurers, and instead said it would allow a 3.3 percent raise.

The news improved shares of some health insurers, including Humana, which derives about two-thirds of its revenue from the Medicare Advantage business. The stock jumped 5.5 percent to $79.11 and was among the biggest percentage gainers on the S. P. 500. UnitedHealth Group gained 4.7 percent to $61.74.

“They didn’t expect the result that they got. That will help with their bottom line,” said Quincy Krosby, market strategist at Prudential Financial in Newark, N.J.

Strengthening economic data has helped stocks rally since the start of the year. On Tuesday, data showed February factory orders rose 3 percent, slightly above expectations. That follows a weak reading on manufacturing on Monday that sparked a pullback in stocks.

The S. P. 500-stock index is now up 10.1 percent since the start of the year.

For the day, the Dow Jones industrial average was up 89.16 points, or 0.61 percent, at 14,662.01. The S. P. 500 was up 8.08 points, or 0.52 percent, at 1,570.25. The Nasdaq composite index was up 15.69 points, or 0.48 percent, at 3,254.86.

The S. P. 500 surpassed its 2007 closing high last Thursday, while the Dow first broke above its 2007 record on March 5.

Stocks pared gains late in the session, giving investors another reason to question the strength of the recent rally.

“The recent legs of this rally have lacked a bit of conviction,” said Mark D. Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia. “What’s been leading equity markets has been more defensive sectors.”

Health care sector stocks are still seen as cheap relative to the overall market. Humana, which has a market cap of about $11.9 billion, has a forward price-to-earnings ratio of 9.4, below the S. P. 500 P/E average ratio of about 16.5. UnitedHealth has a P/E ratio of 10.6 and Cigna, 9.7 ratio.

“We do think that health care stocks are a nice combination of dividend yields, growth and low valuations, and we are very constructive on the sector,” said Jim Russell, senior equity strategist for U.S. Bank Wealth Management in Cincinnati.

Other big gainers in the health care sector included Cigna, up 2.9 percent at $64.75.

Moves are expected to be limited this week before Friday’s employment report.

The March jobs report could give clues on how successful the Federal Reserve has been in lowering unemployment, one of the primary headwinds for the economy.

About 200,000 jobs were created last month, according to a Reuters poll, down from 236,000 in February. The unemployment rate is expected to come in at 7.7 percent, unchanged from the previous month, the poll showed.

In an effort to bring down the unemployment rate, the Fed has maintained an accommodative monetary policy, which has also benefited stocks.

Other gainers included Hertz Global Holdings shares, up 6.8 percent to $23.41, after the company forecast strong earnings and revenue through 2015 as a result of increasing global demand for car rentals and benefits from its recently completed acquisition of Dollar Thrifty.

Among decliners, Delta Air Lines was off 8.1 percent at $14.94. Delta’s unit revenue for March rose at a slower rate than in the prior two months.

Shares of the Nasdaq OMX Group fell 12.8 percent to $27.91 after agreeing to buy a BGC Partners trading platform. BGC shares were up 48.6 percent at $5.72.

Shares of Hewlett-Packard fell 5.2 percent to $22.10 after Goldman Sachs downgraded them to sell.

Interest rates were steady. The Treasury’s benchmark 10-year note fell 8/32, to 101 8/32 and the yield rose to 1.86 percent from 1.84 percent late Monday.

Article source: http://www.nytimes.com/2013/04/03/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Shares Start Lower on Wall Street

February 12, 2013 by Leave a Comment

The stock market drifted lower in thin trading on Monday, pulling the Standard Poor’s 500-stock index back from a five-year high.

With little in the way of market-moving news, the S. P. 500 slipped 0.92 of a point to close at 1,517.01. Last week, the broad-market index edged up slightly to its highest level since November 2007.

Seven of the 10 industry groups within the S. P. 500 dropped.

Now, with major indexes near record highs, many think the stock market’s six-week rally is ready for a pause.

“The consensus seems to be that we’re due for a correction,” said Brian Gendreau, market strategist at the Cetera Financial Group. “If you compound the increase we’ve had so far, this year would be the best year ever for stocks. And nobody thinks that that’s going to happen.”

The best year ever for stocks? For the S. P. 500 index that was 1933, when the index rebounded 46 percent in the middle of the Great Depression.

Among other stock indexes on Monday, the Dow Jones industrial average dropped 21.73 points to 13,971.24. The UnitedHealth Group led the Dow lower, losing 62 cents to $57.12.

The Nasdaq composite fell 1.87 points to 3,192.00.

Trading volume was light, with 2.6 billion shares trading on the New York Stock Exchange. That stands in contrast to a two-month moving average of 3.4 billion.

Solid earnings reports have helped feed the rally in recent weeks. Of the 342 companies in the S. P. index that reported results through last week, two out of every three have beaten Wall Street’s earnings estimates, according to research from Goldman Sachs.

Mr. Gendreau gave three reasons he believed that stocks still had room to run. Even after the market’s recent surge, he said, the typical stock looks fairly priced when compared to underlying earnings. Corporations keep finding ways to increase profits, which helps push stock prices higher. And Americans looking for places to put their savings have few attractive alternatives.

“I’ll go out on a limb and say that I think earnings growth, attractive valuations and pent-up demand will add up to a fairly strong year for equities,” Mr. Gendreau said.

Apple’s stock gained $4.95, to $479.93, after The New York Times reported that the technology giant was developing a wristwatchlike device — in essence a smart watch — that would run the same operating system used for iPhones and iPads.

The stock market raced to a stunning start this year. The Dow and the S. P. 500 have already gained more than 6 percent for the year. The Nasdaq is up 5.7 percent.

Among the companies in the news on Monday, the Danish drug maker Novo Nordisk dropped 14 percent after the Food and Drug Administration refused to approve the company’s proposed diabetes treatments until it received more data, which the drug maker said it could not supply this year. Novo Nordisk’s depositary receipts lost $26.89, to $165.40.

Loews fell 34 cents, to $43.51, after it reported on Monday that it lost $32 million in its fourth quarter, hurt by insurance losses from Hurricane Sandy and sliding prices for natural gas. Loews, a holding company with dealings in insurance, oil and gas and hotels, is largely controlled by the Tisch family of New York.

Carnival, the cruise-ship operator, slipped 29 cents to $38.72 after an engine room fire over the weekend left its cruise ship Triumph stranded in the Gulf of Mexico.

In the bond market, interest rates showed little change. The price of the 10-year Treasury note fell 4/32, to 97, while its yield rose to 1.96 percent, from 1.95 percent late Friday.

Article source: http://www.nytimes.com/2013/02/12/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Economy News Tagged With: , ,

Stocks & Bonds: Wall Street Recovers After Fresh Worries Shake European Markets

September 13, 2011 by Leave a Comment

Markets have been subject to sharp swings in recent weeks, particularly as concerns over the sovereign debt crisis have grown. The latest slide in the currency and stock markets occurred Monday, set off by the resignation on Friday of Jürgen Stark, a top German official at the European Central Bank. His move highlighted policy discord in the bank.

It also aggravated concerns in the currency markets that Germany was preparing contingency plans for its banks in the event of a Greek default, Eric Viloria, senior market strategist for Forex.com, said.

Greek bonds showed record high yield spreads on Monday, while German bonds were at lows, Mr. Viloria noted.

“There are actually quite a bit of factors that are weighing on the euro today,” he said, adding that investors were avoiding assets they viewed as risky. “You are seeing some dollar strength, and that is highlighted by the yields.”

Analysts attributed the market movements on Monday to concerns from last week over Greece and fresh worries about the possibility of sovereign downgrades.

“This is not a problem resolved in an afternoon,” Peter Tuz, the president and portfolio manager at Chase Investment Counsel, said. “And it looks like things are going to get worse before they get better.”

Stocks on Wall Street veered from mixed to more than 1 percent lower, then made a late push to close higher.

The Standard Poor’s 500-stock index gained 8.04 points, or 0.70 percent, to close at 1,162.27. The Dow Jones industrial average added 68.99 points, or 0.63 percent, to close at 11,061.12, and the Nasdaq composite index rose 27.10 points, or 1.10 percent, to close at 2,495.09.

In Europe, the FTSE 100 in Britain dropped 1.6 percent and the Euro Stoxx 50 index of euro zone blue chips was off 3.8 percent. The DAX in Germany lost 2.3 percent, and the CAC 40 in France tumbled 4 percent despite fresh efforts by the French government and one of the hardest-hit banks, Société Générale, to calm nerves.

Asian markets slumped. The Nikkei 225 index closed down 2.3 percent, and the Hang Seng in Hong Kong fell 4.2 percent.

The euro finished at $1.36, after declining rapidly to $1.35 against the dollar, from $1.41 just over a week ago.

Interest rates rose slightly. The Treasury’s benchmark 10-year note fell 10/32, to 101 19/32, and the yield rose to 1.95 percent from 1.92 percent late Friday. Gold fell $46.50 to $1,809.90 an ounce.

In equity markets, the technology, financial and consumer discretionary sectors were all up more than 1 percent.

Bank of America and JPMorgan Chase were each up more than 1 percent, at $7.05 and $32.42, respectively. Wells Fargo rose more than 2 percent to $24.10.

But European financial institutions felt the brunt of the uncertainty on Monday. Moody’s Investors Services warned recently about the exposure of those banks to Greek sovereign debt, and the stock price of Société Générale and BNP Paribas fell as much as 12 percent as investors braced for a possible downgrade to their credit ratings.

While any downgrade was expected to be small, it would probably increase turmoil in financial markets.

Liz Alderman and Bettina Wassener contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=ad1c5e6ec2496f55786062b96a02f76d

Filed Under: Business News Tagged With: , ,

Stocks & Bonds: Wall St. Slides After Bleak Jobs Report

September 3, 2011 by Leave a Comment

Many investors had sold stocks ahead of the Labor Department’s jobs report, which analysts in a Bloomberg News survey had forecast would show a gain of 68,000 nonfarm payrolls.

The monthly report showed there was no job growth in the United States in August, and the flat performance had a direct impact on stocks in market-sensitive sectors.

The August jobs figure was down from a revised 85,000 new jobs added in July. The unemployment rate stayed at 9.1 percent in August, the department said.

Philip J. Orlando, chief equity market strategist at Federated Investors, said the jobs report was “very disappointing. It was much weaker than expected. We were thinking that if today’s jobs number was poor, we would start to see a pullback.”

In addition, analysts said financial stocks were hurt during the day by the prospect that a federal agency was set to file lawsuits against more than a dozen big banks over their handling of mortgage securities. Regulators filed the suits on Friday.

The suits by the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, are aimed at Bank of America, JPMorgan Chase, Goldman Sachs, Citigroup and Deutsche Bank, among others.

“This is not good news from the perspective of the banking sector,” Mr. Orlando said.

When the stock market opened, all three major Wall Street indexes slid lower and stayed there. The Dow Jones industrial average closed down 253.31 points, or 2.20 percent, at 11,240.26. The Standard Poor’s 500-stock index was down 30.45 points, or 2.53 percent, at 1,173.97. Both indexes ended the week lower, the Dow by 0.3 percent and the S. P. 500 by 0.2 percent.

The Nasdaq composite index ended the day down by 65.71 points, or 2.58 percent, at 2,480.33. But it managed to squeeze out a 0.2 percent gain for the week.

The Treasury’s benchmark 10-year note rose 1 8/32, to 101 6/32, and the yield fell to 1.99 percent from 2.13 percent late Thursday.

Kate Warne, investment strategist at Edward Jones, said the jobs report raised fresh concerns about whether the economy might be headed for a new recession.

“Clearly, stocks are responding to the very disappointing jobs report,” Ms. Warne said. “It is one more piece of bad news that is really leading to a reassessment of the possibility of even slower economic growth.”

Though she said she did not believe there would ultimately be a double-dip recession, “the risks probably have risen.”

Financial stocks were affected by the jobs report because of its implications for the real estate market, retailing and consumer lending. The financial sector slid by 4 percent, dragging down the broader market, with the five most actively traded banks in the sector each down by 4 percent or more. Bank of America was more than 8 percent lower at $7.25. Wells Fargo was down 4 percent at $24.20 and JPMorgan was down more than 4 percent at $34.63.

Ms. Warne said that the impending lawsuits meant the banks would face additional legal troubles from lending that took place before the last recession. “There are not just concerns about weak growth, but increased worries that those problems are not behind them,” she said.

Industrial shares fell more than 3 percent. General Electric was down by 2.7 percent at $15.76. CSX was down 4.5 percent at $20.56.

Lower market results in the United States came after declines in Asia and Europe. The Euro Stoxx 50 index closed down by 3.69 percent. The DAX in Germany lost 3.36 percent and the CAC 40 in France fell 3.59 percent, while the F.T.S.E. in Britain was down by 2.34 percent. In Asia, the Shanghai, the Nikkei and the Hang Seng indexes each closed down by more than 1 percent.

“The latest fall follows a highly volatile August period which saw global markets take substantial hits over political uncertainty over the U.S. debt ceiling and subsequent credit downgrade,” John Douthwaite, chief executive of SimplyStockbroking, said in a research note.

In August, all three indexes in the United States turned in their worst monthly performance since 2001. Shares took a beating for reasons that included fears of an economic slowdown and fiscal problems in the United States as well as continuing concerns over debt issues in Europe.

Mr. Douthwaite said market turbulence would probably continue in September because of weak economic data from the United States and Europe.

The worse-than-expected jobs report led some economists to predict new action by the Federal Reserve at its meeting on Sept. 20-21.

Economists from Goldman Sachs said that the Fed was more likely to lengthen the average maturity of its balance sheet, with sales of relatively short-dated Treasuries and purchases of relatively long-dated Treasuries. Mr. Orlando said the central bank could also cut the premium on banking reserves to encourage banks to lend more.

Oil futures in New York for October delivery fell 2.8 percent to about $86.45. Energy related stocks declined by more than 2.5 percent.

Gold rose 2.6 percent to $1,873.70.

Shaila Dewan and Nelson D. Schwartz contributed reporting.

Article source: http://www.nytimes.com/2011/09/03/business/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Stocks and Bonds: U.S. Stocks Return to Pre-Downgrade Level

August 16, 2011 by Leave a Comment

A spate of mergers and acquisitions helped build a rally of more than 2 percent in the Standard Poor’s 500-stock index, leading some analysts to weigh whether the surge signaled a possible period of stability after last week’s steep losses and volatility.

Standard Poor’s downgraded the nation’s credit rating on Aug. 5, after the market had closed at 1,199.38. Stocks sold off the next week, with the S. P. 500 and the Dow Jones industrial average finishing the five-day period nearly 2 percent lower. On Monday, however, the broader market as measured by the S. P. 500 inched above the pre-downgrade level to close at 1,204.49, after gaining 25.68 points, or 2.2 percent.

The Dow was up 213.88 points, or 1.9 percent, at 11,482.90, also exceeding its pre-downgrade close of 11,444.61. The same was the case with the Nasdaq composite index, up 47.22 points, or 1.9 percent, at 2,555.20.

With gains of around 3 percent in utility, energy and bank stocks on Monday, analysts were cautiously weighing whether the worst of the recent upheaval was over.

“For now it is clear that in essence there is a relief in the market,” said Quincy Krosby, a market strategist for Prudential Financial. “You can feel it.”

Still, given the unease that had set in even before the downgrade, stocks are still in a slump. The S. P. 500 is more than 10 percent below where it was as recently as July 22.

And even as shares climbed on Monday, Ms. Krosby and other analysts said there was plenty of new economic information in the week ahead that could upend the gains of the last three sessions, including jobless claims and the Consumer Price Index. In addition, Monday’s volumes were low.

“When the buying picks up, we like to see more buying,” she said. “It is an indication of more conviction.”

New deals helped propel Monday’s market. A multibillion-dollar Google deal, a rise in commodity prices and the perception that European leaders and the central bank would take measures including bond purchases to support heavily indebted member countries could be helping, analysts said, though such sovereign debt and economic problems are expected to remain a factor in the markets.

Financial stocks rose, including Bank of America, which increased 7.9 percent to $7.76. It took steps on Monday to leave the international credit card business, agreeing to sell its $8.6 billion Canadian card venture to the TD Bank Group for an undisclosed amount, and putting its remaining European card portfolio on the block.

Citigroup was up 4.8 percent to $31.27.

Worries about the United States economy and the threat of a financial crisis in Europe had already overwhelmed traders, but the downgrade proved to be a tipping point, sending stocks reeling in what turned out to be one of the most tumultuous weeks on Wall Street.

Analysts said that investors were taking a second look at some of the causes of the volatility from last week.

Investors’ attention was focused on a meeting Tuesday of Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France.

The two leaders will be addressing the threat to the euro zone posed by low growth and teetering public finances in some euro member nations, their room to maneuver circumscribed by fears that France could be next for market attacks.

“People are taking a more rational view of the path ahead, that some of the problems in Europe can be addressed with additional spending restraint from some of the governments,” which will take time, said Russell Price, senior economist with Ameriprise Financial.

The euro rose against the dollar, a development that Ms. Krosby of Prudential attributed to expectations for the Merkel-Sarkozy meeting.

The price of the benchmark 10-year Treasury note fell 14/32, to 98 12/32, and the yield rose to 2.31 percent, from 2.26 percent late Friday.

“Today was a day that people took a little bit of a rest to try to digest all the news that has happened and the volatility that has happened in the market recently,” said George Rusnak, national director of fixed income for Wells Fargo.

Broader commodity prices were up, and investors were probably bargain hunting after last week’s declines, said Keith B. Hembre, the chief economist and chief investment strategist at Nuveen Asset Management.

“It is part of the market trying to find its feet,” he said. “Despite the bounce on Friday, this market has been really beaten up.”

European stocks showed modest gains. The FTSE 100 index in London was up 0.6 percent. The CAC 40 in France rose 0.8 percent and the DAX in Germany was up 0.4 percent. Asian shares rose, with the Tokyo benchmark Nikkei 225 stock average gaining 1.4 percent.

Ben Protess, David Jolly and Bettina Wassener contributed reporting.

Article source: http://feeds.nytimes.com/click.phdo?i=431835457d49853847cff33f1769cb55

Filed Under: Business News Tagged With: , ,

Markets Rise on Optimism Over Greek Vote

June 29, 2011 by Leave a Comment

Concerns over the euro zone debt problems have been a focus of the financial markets for weeks. Investors had been bracing for the Greek Parliament’s decision on the package, which included unpopular wage cuts, tax increases and privatizations.

In Europe, the DAX index in Frankfurt closed up 1.7 percent, while the FTSE 100 in London rose 1.5 percent. National Bank of Greece slipped, closing down 1.9 percent; before the vote, it was up as much as 5.5 percent.

Although approval of the Greek plan took place shortly before the markets opened on Wall Street, the Dow Jones industrial average took some time to find its direction. By early afternoon, the Dow was up 76.40 points, or 0.6 percent. The Dow has been on a higher track for the past two days, and its 145-point gain on Tuesday was its biggest one-day increase since April 20.

The Standard Poor’s 500-stock index was up 10.59 points, or 0.8 percent, and the Nasdaq composite index was up 13.48 points, or 0.5 percent.

Analysts said that by the time the voting took place, investors had already taken positions. “This is classic ‘buy the rumor, sell the news,’ ” said Phil Orlando, chief equity market strategist at Federated Investors. “The equity market was up in anticipation. We priced it in ahead of time.”

In other news, Bank of America, which said it would set aside $14 billion to pay investors who bought securities it assembled from mortgages that later soured, was 3 percent higher. The company expected the agreement would lead to a second-quarter loss of $8.6 billion to $9.1 billion.

In Tokyo, the Nikkei 225 closed 1.5 percent higher.

Yields on benchmark 10-year Spanish, Portuguese and Greek bonds declined, while those in safer equivalents issued by Germany and France rose, indicating investors were willing to switch back into riskier securities.  The euro stood at $1.4426 in late trading in London, up slightly from $1.4371 late Tuesday.

The agreement by Greek lawmakers on the austerity measures was a crucial step in the international rescue of the crippled economy, but the relatively muted market reaction to the vote showed that investors know that the country’s financial troubles are far from over.

“Today’s vote will certainly give some short-term relief to markets, but concerns about the long-term feasibility of Greece’s fiscal plans still remain in place,” said Diego Iscaro, an IHS Global Insight senior economist, in a research note after the vote.

A second vote was scheduled for Thursday on enabling legislation to set the timing of the privatizations, especially of the state-owned electric utility.

“What’s really important is not the vote itself,” said George Magnus, senior economic adviser at UBS in London, “but the implementation of what they’re voting on, and that’s where the programs will come unstuck.”

The vote was critical to unlocking near-term financing, specifically the disbursement of the fifth installment of the original 110 billion euro, or $140 billion, bailout for Athens agreed last year. That installment would be worth 12 billion euros and would enable Greece to meet obligations like bond coupon payments in July, while paving the way for a new international lending program to provide financing through 2014. Details of that program is expected to be provided by euro area ministers on July 3.

Regardless of the votes, some analysts cautioned that the problems for Greece and the euro zone remained far from resolved. Private creditors were still discussing their involvement in a second bailout and many investors thought Greece would still have to default.

“It’s like a terrible form of torture,” Mr. Magnus said. “Everyone knows Greece will default  —  it’s just a question of whether it’s orderly or disorderly.”

In a research report released Tuesday, Citigroup analysts said: “Despite the aid package, eventual Greek haircuts may be inevitable, with estimated private sector haircuts of 65 to 77 percent,” referring to the write-downs that bond holders will be required to accept.

“In other words, a bailout package addresses the liquidity issue much more than the solvency issue,” Citigroup said.

Two Commerzbank analysts, Benjamin Schröder and Peggy Jäger, said early Wednesday that “even if the bills are passed, worries could still linger on for longer, if no broader consensus across Greek political parties forms.”

Article source: http://www.nytimes.com/2011/06/30/business/global/30markets.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,