TradeTheNews.com US Market Update: No Deal in Athens, Contagion Is Spreading
Monday, May 14, 2012
TradeTheNews.com US Market Update: No Deal in Athens, Contagion Is Spreading
DJIA -81 S&P500 -12 NASDAQ -20
***Economic Data*** - (PL) Poland M3 Money Supply M/M: -0.5% v 0.2%e - (MX) Mexico Mar Industrial Production M/M: 1.5% v 1.9%e; Y/Y: 3.1% v 2.8%e
- Global equity markets are getting crushed by the looming prospect of disaster in Greece and also a healthy dose of concern about the situation in China, where the PBoC cut the RRR rate over the weekend after a slew of weak April data. There had been thin hopes of a last-minute deal to prevent fresh elections in Greece, however the political parties in Athens have only hardened their positions, and there are concerns Greece could run out of funds as soon as next month. The tone being heard from some key European officials on Greece has changed notably over the weekend and into the US session, from insisting that a Greek exit would be impossible to implying that a Greek exit could be managed and might be unavoidable. This position is not unanimous as of yet, and German Chancellor Merkel reiterated this morning that it would be best for Greece to stay in the euro zone. With contagion impacting Spain, the yield on 10-year Spanish debt has risen to nearly 6.2%. Meanwhile, yields on UK, Swedish, Finnish, German and Dutch 10-year instruments have dropped to record lows. EUR/USD hit fresh four-month lows at 1.2830 earlier this morning, while EUR/GBP broke below the 0.80 level.
- Shares of Chesapeake are bouncing back firmly this morning after Friday's greater than 12% decline. Last week the firm was forced to take a $3B loan from Goldman Sachs and Jefferies to pay down a debt facility and get some space to complete two key shale gas asset sales. This morning the firm calmed investors on a conference call, saying they still had the liquidity it needed it would still finish up $11B in planned asset sales in the second half of 2012. There had also been rumors making the rounds that activist investor Carl Icahn had taken a "significant" new position in Chesapeake, however executives would not confirm this news on the call. CHK is up 8% this morning.
- Yahoo named a new chairman and tapped an interim CEO, following the departure of CEO Scott Thompson in the wake of the conflict over his academic credentials. Yahoo's board said that it has reached a settlement with Third Point, which has agreed to withdraw its previous board nominations. Shares of YHOO are up 2% on the news. Shares of Interoil had dropped as much as 15% this morning after it disclosed that the government of Papua New Guinea would cancel an agreement for a $6 billion liquefied natural gas project in the country.
***Looking Ahead*** - 11:00 (MX) Mexico Mar Vehicle Production: No est v 268.6K prior; Vehicle Domestic Sales: No est v 83.6K prior; Vehicle Exports: No est v 236.6K - 11:00 (EU) Euro-Area Finance Ministers Meet in Brussels (Eurogroup) - 11:00 (US) Fed to purchase $4.25-5.00B in Notes - 11:30 (US) Treasury to sell $30B in 3-Month and $27B in 6-Month Bills - 11:45 (CH) SNB's Jordan speaks in Zurich - 12:00 (IC) Iceland Apr International Reserves (ISK): No est v 977B prior - 15:00 (EU) Eurogroup press conference
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