Monday Morning Cheat Sheet: 3 Stories Moving Markets
Markets advanced in Asia on Monday. Japan’s Nikkei was closed for the Golden Week holiday, the Hang Seng edged up 0.15 percent, while the S&P/ASX 200 climbed 0.56 percent.
Markets in Europe also advanced, buoyed by news that Italy has finally formed a government. Milan’s FTSE MIB index climbed as much as 1.5 percent. Germany’s DAX was up 0.29 percent, London’s FTSE 100 was up 0.04 percent, and the STOXX 50 index was up 0.54 percent.
U.S. futures at 9:05 a.m.: DJIA: +0.34%, S&P 500: +0.35%, NASDAQ: +0.45%.
Here are three stories to keep an eye on:
1) Italy’s New Government: Equities gained and borrowing costs fell in Italy after Enrico Letta, the nation’s new prime minister, named a coalition government over the weekend. Letta is expected to win the backing of both the center-left Democratic Party and the center-right party in a confidence vote. The move would end nearly two months of political ambiguity that have pretty much stalled the nation’s economic recovery.
The formation of a stable government in Italy will help draw back investors and push down borrowing rates. Bond yields climbed as high as 7 percent in 2012, which was an entirely unsustainable rate. However, Italy was able to sell 3 billion euros ($3.98 billion) of 10-year bonds at 3.94 percent, down from as much as 4.66 percent a month ago.
2) Greek Lawmakers Cut Jobs to Release Funds: After protracted negotiations and evaluations, Greece looks like it is on track to receive the next tranche of aid, worth 2.8 billion euros ($3.67). On top of this, the nation is scheduled to receive another 6 billion euros ($7.65 billion) in May. However, the terms of these disbursements are relatively austere. The Troika has obligated Greece to reduce its public-sector workforce by 15,000 positions in the next two years.
The layoffs have been a point of contention between Greece and the Troika for a few years, but it seems like this is one of those problems that does fade away with time. Greek officials report that much of the reduction in workforce will be attained through general attrition. Greece has already agreed to place 25,000 public workers in a labor pool, where they will receive 75 percent of their wages until they are transferred, or fall out of the pool after a year.
3) Asia Will Lead the Global Recovery: “Asia is set to grow at 5.7 percent in 2013 (with growth in emerging Asia reaching 7.2 percent), leading the global three-speed recovery,” forecast the International Monetary Fund in its Asia-Pacific Economic Outlook. “This pick up in growth, after a year of subdued economic performance, is driven largely by continued robust domestic demand. Consumption and private investment will be supported by favorable labor market conditions, with unemployment at multiyear lows in several economies.”