Portuguese borrowing costs topped 8 percent for the first time this year after two ministers quit, signaling the government will struggle to implement further budget cuts as its bailout program enters its final 12 months.
Secretary of State for Treasury Maria Luis Albuquerque replaced Vitor Gaspar at the Ministry of Finance. That prompted Paulo Portas, who leads the smaller CDS party in the coalition government, to quit, saying the new minister would offer “mere continuity” of the country’s deficit-cutting plans.
“It sounds the alarm bell of austerity fatigue,” said David Schnautz, a strategist at Commerzbank AG in New York. “This domestic noise is definitely negative.”
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Closing comments by Mark Leibovit:
Stocks began the shortened session on a lower note as global events injected a degree of uncertainty into the market.
In Egypt, President Mohammed Morsi was removed from his post through a military coup after he failed to answer the demands of protesting crowds within the timeframe specified by the country’s armed forces.
Gold prices ended the U.S. day session moderately higher Wednesday, on some safe-haven demand amid geopolitical tensions, and on more short-covering and bargain hunting. A weaker U.S. dollar index Wednesday’s was also a positive for the gold and silver markets. August gold was last up $8.90 at $1,252.10 an ounce. Spot gold was last quoted up $7.70 at $1,250.75. September Comex silver last traded up $0.421 at $19.72 an ounce.
Elsewhere, Portugal returned to headlines after two key government officials (finance minister and foreign minister) submitted their resignations. In addition, reports indicate two more ministers (agriculture and social security) are set to follow suit. Prime Minister Pedro Passos Coelho is scheduled to meet with the country’s president tomorrow to discuss the ongoing situation. As a result, the country’s benchmark 10-yr yield spiked 85 basis points to 7.31%. In addition Portugal’s PSI index fell 5.3%. The concerns regarding the country’s future spilled over to other peripheral economies. Italy’s 10-yr yield climbed 11 basis points at 4.51% while Spain’s benchmark 10-yr yield jumped 14 basis points to 4.70%.
Equities fought back from their opening losses with the technology space pacing the advance.
Today’s economic data was plentiful.
The initial claims level decreased from an upwardly revised 348,000 (from 346,000) for the week ending June 15 to 343,000 for the week ending June 29. The Briefing.com consensus pegged the initial claims level at 348,000.
For the past several weeks, the initial claims level has moved in a slight sawtooth pattern, but overall, trends have been relatively flat. Labor conditions have not materially changed over this time.
June ADP Employment Change came in at 188,000 while the Briefing.com consensus expected a reading of 150,000. In addition, June Challenger Job Cuts rose 4.8% year-over-year to follow the prior month’s decline of 41.2%.
The June ISM Services Index was reported at 52.2, below the 54.0 forecast by the Briefing.com consensus, and down from the May reading of 53.7.
Separately, the U.S. trade deficit widened to $45.0 billion in May from an upwardly revised $40.1 billion (from $40.3 billion) in April. That was the largest deficit since November 2012. The Briefing.com consensus expected the trade deficit to increase to $40.8 billion.
The goods deficit rose to $63.4 billion in May from $58.4 billion while the services surplus increased to $18.4 billion from $18.3 billion.
May exports fell by $0.5 billion from $187.6 billion in April to $187.0 billion.
Bond and equity markets will be closed tomorrow in observance of Independence Day. On Friday, June nonfarm payrolls, nonfarm private payrolls, average workweek, hourly earnings, and the unemployment rate will all be reported at 8:30 ET.
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IN THE NEWS:
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Will Tightening Cure as Carney Takes Over in Britain?
As Mark Carney arrives at the Bank of England, are we seeing the end of QE? … Mark Carney votes for the first time on the Monetary Policy Committee … will be a seminal decision, albeit one the rest of the country won’t discover until the minutes are published on July 17. The new Bank of England Governor has to choose whether to follow his predecessor Sir Mervyn King and call for more quantitative easing (QE), or to vote with the majority of the committee and judge that the £375bn already injected is enough. – UK Telegraph
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