Today's Greek News story, alleging that Greece is seeking better terms to an EU/IMF deal is unfounded. The Greek news is baseless because there is no formal agreement in place, and the IMF has not been approached as yet by Greece. However, we expect Greece to seek to soften EU and IMF demands, as the austerity measures it seeks to impose on its population are simply impossible to accomplish in an effective manner.
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Today's Greek News
While we expected international data to drive the global marketplace this day, the specific driver jumped on board from outside of scheduled reports. The day's market drivers included an unfounded and inconsequential report about Greece, alleging that Greece is seeking to adjust terms with the IMF and EU. While we agree that this will occur, we do not expect it to nullify the EU's pledge of assistance. That EU pledge is what has stabilized Greek securities and bond yields, and as it still exists, today's drop in Greek bond yields is unfounded. Therefore, we suggest it wise to take advantage of the decline for those favoring long trade positions in Greece (at least short-term). The day also produced the strong ICSC sales data we correctly forecast for readers in our "Week Ahead" copy. The Reserve Bank of Australia also weighed in and the FOMC will report its meeting minutes in the afternoon. The US Transportation Secretary suggested a maximum fine for Toyota (NYSE: TM), given it's alleged cover up of the pedal safety concern. AT&T (NYSE: T) is investing in its network, a good sign for equipment and cable makers.
Greek Troubles Renewed
Unconfirmed information from a Market News International article has Greek bonds diving and the euro weakening today. The news service reports that Greece may be seeking to amend its agreement with the EU and IMF due to the tough conditions of the agreement. The problem with this whole bit of misinformation is that there is no real deal yet, only a formal and public assurance of support from the EU. The IMF could eventually be involved based on discussions and supposition, but is not involved yet; not until Greece comes to it for aid. Also, the IMF itself denied that Greece came to it at all today. It is, however, very likely Greece will seek some softening from its backers, given a high degree of difficulty in imposing strangling austerity measures on its people.
ICSC Sales Strong on Easter
The International Council of Shopping Centers (ICSC) reported strong Weekly Same-Store Sales data in the premarket. Wall Street Greek readers expected this, after reading our guidance: "Expect a robust rise for the latest week, as this year's Easter holiday falls a week ahead of last year's" in our Week Ahead copy. This week's data, covering the period ended April 3, showed strong sales growth of 2.1% on a week-over-week basis and a 4.7% increase against the prior year level. For informational purposes, the data covering the period ended March 27 showed a weekly sales gain of 0.6% and year-to-year improvement of 3.2%.
A slew of overseas economic activity dominated the day's early wire. The Reserve Bank of Australia hiked its cash rate by a quarter point, to 4.25%, as expected. Bank Governor Glenn Stevens commented, "The global economy is growing, and world GDP is expected to at close to trend pace in 2010 and 2011. The expansion is still hesitant in the major countries, due to the continuing legacy of the financial crisis, resulting in ongoing excess capacity. In Asia, where financial sectors are not impaired, growth has continued to be quite strong, contributing to pressure on prices for raw materials. The authorities in several countries outside the major industrial economies have now started to reduce the degree of stimulus to their economies."
Australia has a raw materials resource driven economy, and so this early cyclical market should move ahead of other industrial markets, and later on, developed economies in raising rates. In other words, this is a right and proper, timely move.
The Bank of Japan begins its two-day policy meeting, and so prepare for the BOJ's statement sometime on April 7. The World Economic Forum on Latin America kicks off in Cartagena, Colombia.
The American Federal Reserve and Treasury are active today as well. Treasury Secretary Timothy Geithner is in India, where he introduced a financial partnership with the Indian Finance Minister in New Delhi. However, what made the news wire this morning was his statement on the yuan: "As I said before and I'll say it again, but I want to make sure I am repeating myself, I am confident that China will decide it's in their interest to resume the move to a more flexible exchange rate that they began some years ago and suspended in the midst of the crisis," he told India's NDTV." The Treasury Department was due to report on China's currency policy, within it's report on global trade, and there was some speculation about whether the Administration would pick a fight at this very inopportune time. However, Geithner opted to delay the report this past weekend. The yuan's peg to the dollar helps its exports, but the Chinese may soon find a need to let its currency rise in order to counter domestic inflation.
The Fed will publish the minutes of its most recent Federal Open Market Committee (FOMC) meeting at 2:00 PM. At 1:00 PM, Minneapolis Federal Reserve Bank President Narayana Kocherlakota will address the Minnesota Chamber of Commerce in Bloomington, Minnesota.
Corporate News Drivers
Toyota (NYSE: TM) was issued a suggested penalty for reporting its scandalous pedal problems well beyond US legal time limits. Transportation Secretary Ray LaHood proposed a maximum civil penalty of $16.4 million. LaHood said Toyota waited at least four months to report its safety defect, well beyond the five day legal limit. TM shares are down fractionally, as the fee is a nonoperating item, and the company reported a 41% increase in US sales in March (which matters a lot more than the fine).
AT&T (NYSE: T) announced it would invest $1 billion in 2010 to scale its delivery of applications, mobility and cloud services for global companies, to expand small business services within the United States and to continue extending its network globally. This is good news for companies like Cisco Systems (Nasdaq: CSCO). T shares were down fractionally, while CSCO was up slightly.
Tuesday's short list of earnings reports includes Sandvine (Toronto: SVC.TO, OTC: SNVNF), Sinovac Biotech (Nasdaq: SVA), Chase Corp. (AMEX: CCF) and Franklin Covey (NYSE: FC).
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