Stocks sour as Apple results leave bitter aftertaste

LONDON - Disappointment over US corporate earnings, most notably at Apple Inc., the world's largest company, pushed stocks lower on Wednesday and investors towards the shelter of bonds.

Retrenchment and caution dominated trading in other assets, with the dollar slipping a little further from its recent highs and commodities such as gold and oil resuming their downturn.

Stocks will look to corporate earnings on both sides of the Atlantic for direction. Meanwhile, the Greek parliament will vote on reforms it must undertake for talks on a multi-billion euro bailout to start this week, which will help determine broader sentiment in Europe.

The FTSEuroFirst 300 index of leading European shares fell 0.5 percent in early trade to 1,588 points. Germany's DAX fell 0.6 percent to 11,534 points and France's CAC 40 was down 0.5 percent at 5,079 points.

Britain's FTSE 100, which is more exposed to the mining and energy sectors, was down 0.7 percent. British investors are also awaiting the latest Bank of England policy minutes, which may show a more hawkish tilt towards raising rates.

"Despite a beat at the earnings level and a surge in revenue from China, the market latched onto disappointing overall iPhone shipments relative to street expectations," said Jim Reid at Deutsche Bank in London, of Apple's results.

"Combined with a near-4 percent fall for Microsoft in extended trading after a similarly disappointing report, (U.S.) futures have fallen this morning."

S&P futures showed Wall Street expected to open down around 0.5 percent.

European bourses were also weighed down by a 4 percent fall in chip maker Arm Holdings. Although ARM posted a 32 percent rise in second-quarter profit, the results from Apple, a major customer, hit hard.

Earlier in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan slid 1 percent, its biggest decline in two weeks.

Japan's Nikkei stock index ended down 1.2 percent, snapping its six-day rising streak and pulling away from Tuesday's nearly four-week closing high as the Apple news reverberated on related tech shares.

STERLING EFFORT

Following its tumble to a five-year low on Monday, investors remained wary of gold. It reversed Tuesday's rebound to trade down 0.7 percent on the day to $1,090.95 per ounce.

"We believe gold should range trade around current levels, but do not dismiss the possibility of further price falls, given the lack of safe-haven interest," Barclays commodities analysts wrote in a note to clients.

Crude oil futures were still under pressure too, as investors worried about ample supply. U.S. crude was down 1.5 percent at $50.10 and Brent shed more than 1 percent to $56.43.

In currencies, the euro edged up to $1.0950 , continuing its rebound from Monday's three-month low of $1.0808, and the dollar index slipped 0.1 percent to 97.218. On Tuesday, it rose as high as 98.151, a level not seen since late April.

Sterling was the biggest mover among major currencies. It was up 0.4 percent against the dollar at $1.5615, supported by expectations the Bank of England will raise interest rates around the turn of the year.

On Greece, Standard & Poor's upgraded its sovereign credit rating on Tuesday by two notches and revised its outlook to stable from negative, citing euro zone countries' initial agreement to start negotiations with Athens on a third bailout.

European bond markets awaited the Greek parliament vote, sticking to narrow ranges. Benchmark 10-year Bund yields fell a basis point to 0.77 percent, and Italian yields were steady at 1.96 percent.

"The newsflow since last week's deal does not fill us with great hope about the design of the pending deal, which is one reason we retain a fairly pessimistic view about what has

been solved in Greece," said Michael Michaelides at RBS.

The yield on 10-year U.S. Treasuries slipped a basis point to 2.33 percent.

source: www.abs-cbnnews.com

Dollar, stocks look set for biggest weekly gains in months

LONDON - The dollar looked set for its biggest weekly rise since May on Friday as economic data reinforced expectations of a U.S. interest rate hike this year, with European shares holding steady on the view that Greece will secure a bailout.

The dollar hovered near a seven-week high against a basket of major currencies, boosted by lower U.S. jobless claims. The dollar index is up 1.6 percent this week.

The euro was mired close to a seven-week low of $1.0854, hit in the previous session. The dollar touched a three-week high of 124.23 yen.

Attention has returned to gauging the timing of the next U.S. rate rise, with investors keen for clues in U.S. CPI data and Michigan sentiment data due out later in the session.

"The focus is turning to the U.S. rate cycle, and (the market reckons) a September rate hike is still, if not probable, at least possible," RBC Capital Markets global head of FX strategy, Adam Cole, said. "That's picked up from Greece as the main driver of our market and therefore the dollar is, in a fairly parallel move, stronger off the back of it ... From now the euro goes down primarily because the dollar is going up."

Euro zone shares eased as a relief rally over Greece's bailout agreement ran out of steam. The Euro lost 0.1 percent but has rallied 8 percent over the last two weeks, its biggest fortnightly gain since January.

German yields were lower at the opening of a parliamentary debate in Berlin, as the government sought approval for talks on a third bailout program for Greece.

Following its successful passage through the Greek parliament, German lawmakers are expected to give Berlin a green light to start negotiations.

Analysts said that with the risk of a Greek exit from the euro zone diminished, the market would focus again on policy divergence between the Fed, which is pondering rate rises, and monetary easing by the ECB.

"There is a little bit of an anticlimax after the Greece headlines... A lot of people did not expect the worst to happen and so money had already poured in," Peregrine & Black trader, Markus Huber, said.

"Along with the focus on central bank timing of interest rate hikes, both (Bank of England governor Mark) Carney and (Federal Reserve President Janet) Yellen, that's probably why the market is going back and forth."

Sterling hit its highest against the euro in more than 7-1/2 years after Carney said the decision to raise rates will come into "sharper focus" around the end of 2015, his strongest hint yet about the timing of the bank's next move.

The MSCI World Index, which tracks stocks from developed economies, is up 2.2 percent this week, its biggest weekly gain since May.

MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent as Chinese shares recovered further after a series of government support measures to halt their recent crash.

Advancing for the second straight day, Shanghai shares rose 3.5 percent.

Although drastic government measures have managed to stem its slide, the benchmark Shanghai index is still down roughly 20 percent from a 7-1/2-year peak reached a month ago.

Brent crude oil rose slightly, underpinned by a weaker dollar and a power outage at Britain's largest oilfield, though a supply glut kept prices pinned near $57 per barrel.

Plentiful supply also crimped platinum prices, which fell below $1,000 an ounce for the first time since February 2009. A seasonal drop in demand for metals also kept copper under pressure.

source: www.abs-cbnnews.com

Greece accepts reforms needed to get bailout

ATHENS - The Greek parliament passed sweeping austerity measures demanded by lenders to open talks on a new multibillion-euro bailout package to keep Greece in the euro, but dozens of hardliners in the ruling Syriza party deserted Prime Minister Alexis Tsipras.

The package was approved with 229 votes in the 300-seat chamber. There were 64 votes against it and six abstentions. But Tsipras required the support of pro-European opposition parties to push the measure through, leaving a question over the future of his government.

Tsipras said there was no alternative to the package, which he acknowledged would cause hardship, but he stood by the decision. "I am the last person to shirk this responsibility," he told parliament.

Government spokesman Gabriel Sakellaridis acknowledged the vote laid bare a split in Syriza, but he said the government's priority was to secure the bailout, suggesting that there would be no immediate move towards new elections.

In exchange for funding worth up to 86 billion euros ($94 billion), Greece has accepted reforms including significant pension adjustments, increases to value added taxes, an overhaul of its collective bargaining system, measures to liberalize its economy and tight limits on public spending.

It has also agreed to sequester 50 billion euros of public assets in a special privatization fund to act as collateral on the deal.

The measures were branded "social genocide" by the firebrand speaker of parliament Zoe Constantopoulou and there were violent clashes between protestors and police outside parliament as the debate went on before the vote.

Among the 38 Syriza rebels was former Finance Minister Yanis Varoufakis, who was sacked by Tsipras last week and who denounced the bailout deal as "a new Versailles Treaty" - the agreement that demanded unaffordable reparations from Germany after its defeat in World War One.

Energy Minister Panagiotis Lafazanis and Deputy Labor Minister Dimitris Stratoulis also voted against the package.

Amid speculation that both ministers could lose their jobs in a reshuffle, possibly as early as Thursday, Lafazanis said he remained loyal to the government but was ready to offer his resignation, joining Deputy Finance Minister Nadia Valavani, who stepped down earlier on Wednesday.

"We support Syriza in government and we support the Prime Minister. We don't support the bailout," he said after the vote.
Elected in January on an anti-austerity platform, Tsipras made an about-turn following grueling all-night negotiations in Brussels on Monday, giving in to lenders' demands for immediate reforms to prevent a chaotic exit from the single currency.

Speaking in parliament before the vote, Tsipras made clear he was supporting the package against his will but there was no alternative if Greece was to avoid financial collapse.

"I acknowledge the fiscal measures are harsh, that they won't benefit the Greek economy, but I'm forced to accept them," he said as he made a final appeal for support.

'A NEW VERSAILLES TREATY'

With Greek parliamentary approval secured, the way has been cleared for other national parliaments to approve the start of bailout talks and for the release of funding to allow Greek banks to re-open, more than two weeks after capital controls were imposed to prevent them from collapsing.

Eurozone finance ministers are due to hold a conference call on Thursday at 10 a.m. (0800 GMT) to discuss the vote.

With Greece facing an urgent deadline on July 20, when a 3.5 billion euro payment to the European Central Bank is due, EU officials raced to agree a bridge financing accord that would enable Athens to avoid defaulting on the loan.

Despite strong objections from Britain and the Czech Republic - EU countries that do not use the euro - a 7 billion euro loan is expected to be extended to Greece from the European Financial Stability Mechanism (EFSM), an EU-wide fund not intended for euro zone funding needs.

Given the hurdles facing the agreement, doubts have surfaced about how long it could hold together, with one senior European Union official saying it had a "20-, maybe 30-percent chance of success".

After its deepest crisis since World War Two, the Greek economy has lost more than a quarter of its output and more than one in four of its workforce is unemployed. It is unclear how it can sustain the burden of one of the most far-reaching austerity programs ever imposed on a euro zone country.

A study by the International Monetary Fund issued on Tuesday called for much more debt relief than Greece's euro zone creditors, particularly Germany, have been prepared to accept so far.

Berlin, which along with the other creditors knew about the IMF study before agreeing to new bailout talks, may wince at providing huge debt relief to a country it scarcely trusts to honor its promises.

But Germany insists on having the IMF in the negotiations to help keep Greece in line. It may countenance extending repayment periods for Greek debt but has said it will not accept a writedown, with the finance ministry insisting it could not accept "a debt haircut via the backdoor".

'EUROPE'S BANKRUPT CHILD'

The European Commission published its own assessment of Greece's debt burden on Wednesday that also offered the prospect of debt relief. While ruling out any write-offs, the Commission said debt reprofiling was possible, as long as Greece implemented the reforms to which it has agreed.

Washington has stepped up pressure for a deal between the euro zone and NATO member Greece. U.S. Treasury Secretary Jack Lew is making a short-notice trip to Frankfurt, Berlin and Paris this week to press for a quick agreement.

Although the bailout package is much tougher than the Greek people could have imagined when they resoundingly rejected a previous offer from the creditors in a referendum on July 5, most want to keep the euro.

With banks shut and the threat of a calamitous exit from the currency bloc hovering over the country if it cannot conclude a deal, many Greeks see the package as the lesser of two evils.

"We are Europe's bankrupt child and as a child, Europe has been supporting us for five years and told us what we needed to do to get out of this situation," said Yannis Theodosis, a 35-year-old civil engineer. "We did nothing and now we are paying the consequences."

Civil servants held a strike on Wednesday, as did pharmacists, whose industry would be opened up under the reform package, in demonstrations that passed peacefully until a small group threw petrol bombs at police, who responded with tear gas and flash bombs.

Calm later returned but nearby streets were empty and garbage bins were still burning. About 30 people were detained, according to a police source.

source: www.abs-cbnnews.com