This week starts with Spain receiving $125B to rescue its banking system as their large banks were on the cliff of collapse. That should help the stock market after its very strong week last week. Treasury will auction $66B of notes and bonds beginning Tuesday thru Thursday; $32B of 3 yr notes on Tuesday, $21B of 10s the next day and $13B of 30 yr bonds Thursday. Economic reports should carry some weight this week with retail sales for May, PPI and CPI, two reports on the manufacturing sector (industrial production and capacity utilization both on Friday).
Spain abandoned unilateral attempts to rescue its banks and became the fourth country in the 17-member currency union to seek an emergency bailout. The aid blueprint hammered out in an emergency conference call among euro finance chiefs two days ago is designed to create a line of defense if the Greek voting unleashes a new bout of market turmoil. Next Sunday Greece will vote again to form a government, two months ago there was no consensus with the country tilting toward rejecting the EU austerity pushed on it. The most recent surveys showed the main party opposing the terms of its bailout vying for first place.
US interest rates will likely stay in a relatively narrow range with auctions and still fears about the outcome of the Greek elections. Look for the US stock market to continue to improve on the Spanish developments. As has been the case for the last 10 months, anything or any comment out of Europe will have an impact on investors’ sentiment.
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