With no break in the standoff between Greece and its eurozone creditors, tensions remain high.
By Peter Martin
Wednesday, February 11, 2015
But some buoyancy in the stock markets today indicate the market as a whole still holds hope of a deal being struck when European financial ministers meet tomorrow in Brussels.
Jens Weidmann, the chief of Germany’s Bundesbank and a member of the ECB’s Governing Council, rattled markets earlier with comments made to Reuters in which he stuck to the case for austerity. ‘I am firmly convinced that Greece can only solve its problems in the long run by making its public finances solid and its economy more competitive,’ said Mr Weidmann.
In the wake of those comments, European bourses dipped, though later recovered on speculation that a compromise deal could be tabled. US stocks pushed higher, helped by upbeat earnings from drinks giant Coca-Cola ($KO). By early afternoon in New York, the Dow Jones was up 71 points or 0.4% at 17,800, the S&P 500 Index had risen 0.66% to 2060.2, while the NASDAQ 100 surged 1.2% to 4266.0.
Coca-Cola gained 2.5% after reporting better-than-expected earnings and revenue for its fourth quarter. Coke’s fourth-quarter earnings, excluding items, grew to 44c per share, compared to an expected 42c per share, while revenue came in at $10.87 billion, versus expectations of $10.76 billion. North American sales, the company’s biggest market, grew 2% in the fourth quarter, which came as welcome news after spending most of 2014 in something of a rut.
On the macroeconomic news front, wholesale inventories expanded 0.1% in December, a build that comes as sales appear to be waning. Sales for the wholesale sector shrank a worrying 0.4%, which pushes the stock-to-sales ratio up to a flabby 1.22, the likes of which haven’t been seen since 2009.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), meanwhile, reports there were 5.028 million job openings at the end of December, up from 4.847 million on the last business day of November, which comes alongside a rising number of hires in December (at 5.148 million, it is the highest number of hires in seven years). The rate of increase in these numbers is slight, but the picture painted is one of improvement. Furthermore, the upward movement of openings when hires are also increasing does not jibe with the Fed’s description of underutilization in the labor market and strengthens the argument for the Fed to hike rates sooner rather than later.
Richmond Fed President Jeffrey Lacker, who is a voting member of the FOMC this year, said today that he thinks the first hike should occur in June. ‘At this point, I think June looks like the attractive option" said Mr Lacker. ‘The data could change that, but it would have to be surprising data for me.’ Johns Williams, the head of the San Francisco Fed and also a voting member of the FOMC, has a similar view, saying in an interview with the Financial Times that economic conditions are ‘getting closer and closer to those where it makes sense to really start thinking seriously about starting this process of normalization.’
The strength of the US economy in comparison to the state of the global economy means that there could be an adverse market reaction to such a move, according to Mr Williams, but he ‘wouldn’t see this as being a huge risk or a danger or an argument against doing what is the appropriate thing. The US dollar has strengthened 0.58% against the Japanese yen today and more than 1% against the Canadian dollar.
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