Reuters - Golden fetas

Golden fetas


Greece’s deal with its creditors makes it look a bit less like Sisyphus. But it still resembles a highly challenged Hercules.

The weight of the country’s debt – equivalent to around 180 percent of GDP – evokes the mythical figure who had to push a stone endlessly up a hill. That’s less the case after a group of its euro zone creditors agreed on Dec. 5 to tweak the terms of existing borrowings. Some will now be repayable later, while some floating-rate debt will be swapped for new borrowings fixed at current low rates. That’s helpful without being a giveaway.

Some hefty tasks remain. Greece plans to privatise 6 billion euros of state assets. But in 2016 it only notched up 500 million euros. More onerous is the demand for a fiscal surplus, before interest payments, of 3.5 percent – something almost no European countries have managed for long. Greece, and lender the International Monetary Fund, say it can’t be done. Germany disagrees.

Think of that number not as a calculation but as a negotiation, and the picture clears a little. Germany doesn’t want to go too easy on a country whose previous two bailouts failed. Greece’s increasingly unpopular ruling party, Syriza, doesn’t want to appear weak, or agree to targets that cannot be met. But all know that if Athens can clean up enough to regain access to global debt markets, there is hope.

There is therefore room for a compromise. A final deal might see Greece meet the 3.5 percent target but only for a year or two – or lower the target to, say, 2.5 percent. But Athens will have to give something to get something. Half of the country’s wage and pension earners pay no income tax. The state transfers around 10 percent of GDP into the pension system – four times the euro zone average – yet the government denies it is too generous.

Greece can’t push too hard, and nor should it. German and Dutch elections are coming. Euro leaders won’t want to appear too soft in front of Italy, which just tossed out reformist Prime Minister Matteo Renzi and needs to recapitalise its banks. And if a deal really can’t be reached, Prime Minister Alexis Tsipras may resign. That could usher in a government that is more co-operative, if not more Herculean.

>>> US After Hours Summary: PLAY +12.5%, WDC +6% following earnings/gu


After Hours Summary: PLAY +12.5%, WDC +6% following earnings/guidance, WDC SSD also higher... SIGM -13%, AVAV -11% following earnings/guidance, several names lower following offering news

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: PLAY +12.5%, WDC +5.9% (raises Q2 outlook and renews patent cross-license agreement with Samsung)

Companies trading higher in after hours in reaction to news: VKTX +11.6% (confirms the FDA has granted orphan drug designation to VK0214 for the treatment of X-linked adrenoleukodystrophy), ANTH +10.9% (reports Blisibimod BRIGHT-SC IgA Nephropathy continues to demonstrate 'positive' trends in the week 48 analysis; promotes J. Craig Thompson to CEO replacing Paul Truex who has been appointed to new role as Exec Chairman), STX +2.2% (WDC sympathy), ENPH +5.1% (continued strength)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: SIGM -13%, AVAV -11%, SEAC -5.4% (ticking lower)

Companies trading lower in after hours in reaction to news: OHAI -12.9% (thinly traded; provides update on two of is legacy portfolio companies that will likely have a negative impact on the fair value of those investments), LADR -10.3% (commences 10 mln common stock offering by certain affiliates of Alberta Investment, GI Partners, Northgate Capital and TowerBrook), PES -7.5% (announces public offering of 9 million shares), ESV -6.4% (commences private placement of $650 mln of exchangeable senior notes due 2024 and announces private offers to exchange outstanding senior notes), BBG -3.9% (commences 11.5 mln common stock offering), BLUE -1.9% (commenced an underwritten public offering of $200 million of its common stock; discloses in Form 424B5 that Celgene indicated an interest in purchasing ~$50 mln in shares of common stock), NDRM -1.3% (launches a follow-on offering of ordinary shares)

>>> US Close Dow+0.18% S&P +0.34% Nasdaq +0.45% Russell +1.11%


Closing Market Summary: S&P 500 Logs Third Consecutive Gain

The stock market registered its third consecutive advance on Tuesday with the S&P 500 rising 0.3% while the Nasdaq Composite (+0.5%) outperformed slightly.

Once again, the trading day was very quiet, but once again, that did not stop the market from inching higher. Investor sentiment remained upbeat despite the weekend failure of a constitutional reform referendum in Italy. The country's MIB index surged 4.2% while demand for Italian debt sent Italy's 10-yr yield lower by four basis points to 1.95%.

Equities spent the first two hours of action near their flat lines, but climbed into the afternoon amid gains in most sectors. A few cyclical sectors opened in the red, but only energy (-0.1%) remained in negative territory when the closing bell rang. To be fair, most other growth-sensitive groups settled near the broader market while financials (+1.0%) continued their recent outperformance. The financial sector extended its December gain to 2.8%.

Only one other sector—telecom services (+1.5%)—ended the day ahead of the broader market, underscoring today's range-bound action. However, small cap stocks saw more movement with the Russell 2000 rising 1.1% as participants showed increased demand for domestically-oriented names.

Market participants received a flurry of earnings, but the consumer discretionary sector (+0.3%) settled near the S&P 500 even though Autozone (AZO 779.81, +3.39) and Toll Brothers (TOL 31.94, +1.47) climbed after releasing above-consensus results. The two posted respective gains of 0.4% and 4.8% while the iShares Dow Jones US Home Construction ETF (ITB 27.86, +0.46) climbed 1.7%.

The modest uptick in the discretionary space masked a 7.6% dive in the shares of Chipotle Mexican Grill (CMG 366.37, -29.90). The stock extended its 2016 decline to 23.7% after management made cautious comments about guidance for fiscal year 2017.

Elsewhere, Dow component Boeing (BA 152.24, +0.08) made its way into the morning newsflow after President-Elect Donald Trump complained about the high cost of the Air Force One program. Shares of Boeing were down about 0.5% in early action, but the stock erased its loss by the close, likely due to the understanding that Boeing's business would see little to no impact even if the U.S. government cancelled its order for a new aircraft.

It is worth noting that the energy sector (-0.1%) displayed resilience. The sector erased a 1.0% loss even though crude oil slumped, ending the day lower by 1.5% at $50.95/bbl.

Treasuries spent the day inside narrow ranges with modest demand for the 10-yr note sending its yield lower by a basis point to 2.39%.

Today's participation was a bit light as fewer than 860 million shares changed hands at the NYSE floor.

Economic data included Productivity, Unit Labor Costs, Trade Balance, and Factory Orders:

  • Third-quarter productivity was left unrevised at 3.1% (consensus 3.3%) while Unit Labor Costs were revised up to 0.7% from 0.3% (consensus 0.2%)
    • Higher unit labor costs may not be the best thing for corporate profit margins, yet there is an encouraging element for consumer spending growth since the revision for unit labor costs was driven solely by an increase in hourly compensation growth
  • The trade deficit widened to $42.6 billion in October (consensus -$41.8 bln) from an upwardly revised $36.2 billion deficit (from -$36.4 bln) in September
    • Net exports will be a drag on fourth-quarter real GDP, considering October real trade deficit of $60.30 billion was above the third-quarter average of $56.60 billion
  • New orders for manufactured goods increased 2.7% in October (Consensus +2.5%) on top of an upwardly revised 0.6% increase (from 0.3%) in September
    • Overall demand remains sluggish, considering orders are still down 2.0% year-over-year

Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while October JOLTS will be announced at 10:00 ET. October Consumer Credit (consensus $18.70 billion) will be reported at 15:00 ET.

  • Russell 2000 +19.5% YTD
  • Dow Jones Industrial Average +10.5% YTD
  • S&P 500 +8.2% YTD
  • Nasdaq Composite +6.5% YTD

*FAURECIA IN TALKS TO BUY 20% STAKE IN PARROT AUTOMOTIVE

*PARROT : IN TALKS W/ FAURECIA ON PARTNERSHIP FOR AUTOMOTIVE
*FAURECIA IN TALKS TO BUY 20% STAKE IN PARROT AUTOMOTIVE
*FAURECIA TALKS ON PARROT AUTOMOTIVE ENTERPRISE VALUE OF EU100M
*FAURECIA IN TALKS TO LIFT PARROT AUTO SHR TO 50.01% BY 2019
*FAURECIA: WOULD BE IN POSITION TO OWN ALL OF PARROT AUTO BY '22

FT : Renzi allies join opponents to demand early elections in Italy

Renzi allies join opponents to demand early elections in Italy
PD members see swift poll as best path to political comeback after referendum rout

Allies of Matteo Renzi, Italy’s outgoing centre-left prime minister, have joined opposition calls for fresh elections in the wake of his referendum defeat, making it more likely that the country will go to the polls to choose a new parliament next year.

Influential politicians in Mr Renzi’s Democratic party (PD) see early elections as a way to make a quick political comeback after a stinging reverse in Sunday’s vote on changes to Italy’s constitution.

“There’s a large front within the Democratic party which is pushing for this,” said one official close to Mr Renzi.

Parliamentary elections are not due until early 2018 but the scale of the defeat suffered by Mr Renzi, the 41-year-old former mayor of Florence, has triggered growing calls for voters to be allowed to pick a new leader with a strong political mandate as rapidly as possible.

Before the referendum the two leading anti-establishment opposition parties, the Five Star Movement and the Northern League, had urged new elections in the event of a No win. They have repeated those calls since the vote.

The fact that large parts of the PD now agree increases the likelihood that any interim government would most likely be shortlived and limited in its scope.

“We don’t want to waste any time,” said Ettore Rosato, a senior Democratic lawmaker in the lower house of parliament, on Italian television on Monday night.

Angelino Alfano, Mr Renzi’s centre-right interior minister, added that he could imagine elections as early as February. “I am increasingly convinced that . . . this legislature is coming to its conclusion,” he said.

Mr Renzi’s spokesman declined to say whether the prime minister had settled on this strategy. From the point of view of the Democratic party, support for early elections would help it to fend off any accusation that it wants to cling to power.

“These guys want to stick around for another year and a half,” said Matteo Salvini, the leader of the Northern League, on Italian television, arguing that such a plan was being hatched “on the phone lines between Rome and Brussels, Brussels and Rome”.

One obstacle for a move to quick elections is that this may face resistance from Sergio Mattarella, the Italian president who is the main powerbroker in the country’s politics and is known for being cautious.

A further difficulty from a practical point of view is that Italy’s electoral law for the lower house may first need to be changed, from a system that awards bonus seats to the winning party to one based on proportional representation. The electoral law is becoming increasingly unpopular with the main political parties and could in any case be struck down in a constitutional court ruling that is due in coming months.

Though some analysts have cautioned that talks on changing the electoral law could be long and complicated, Mr Rosato said that there were “all the tools” to move on it very quickly.
The debate over early elections will be at the top of the agenda as Mr Renzi meets members of his Democratic party on Wednesday in a showdown with leftwing dissidents seeking to oust him as party secretary.

Francesco Boccia, the head of the budget committee in the lower chamber of parliament, called on Monday for a renewal of the top ranks of the party.

Other PD members are expected to stick by Mr Renzi — potentially sparking a battle for the future of the party. “The left has been our main opponent and it’s nothing new. The past is coming back,” warned Francesca Puglisi, a PD senator from Bologna. “Tomorrow we have an important and delicate meeting, in which we will strongly ask our secretary Matteo Renzi to keep leading the Democratic party,” she added.

One of the difficulties for Mr Renzi in staying on as PD chief is that he would be forced to support the new government, which must take on some unpopular tasks, such as dealing with Italy’s troubled banks and negotiating a new electoral law. For this reason, Mr Renzi’s backers say he may want to move quickly to a party congress early in the year and then rapidly to new elections.