On Tuesday European markets are trading lower after concerns resurfaced about debt in the Euro zone. Yesterday EU finance ministers rejected an offer by Greece’s private creditors to restructure Greek debt, renewing fears of an unstructured Greek default. Greece’s creditors claim that 4% is the lowest level they can offer for a coupon on new longer term Greek bonds in exchange for their existing Greek bond holdings that are already written down by 50%.
Greece Finance Minister Evangelos Venizelos claimed that Greece is unwilling to accept a coupon worth more than 3.5%. Europe’s finance ministers supported Greece’s 3.5 % level during their meeting on Monday.
EU Finance Ministers are aiming to bring down Greece’s GDP ratio to 120% by 2020. If creditors insist on 4% with the coupon, Greece won’t be able to meet the 120% GDP level by 2020.
A new deal worked out with Greece’s creditors is a primary condition for Greece to receive additional bailout funds from the EU and IMF. With no support from the EU and IMF, Greece could struggle to make a 14 billion payment it owes on bonds due on March 20th.
Portugal Debt Concerns
The Wall St. Journal reported on Tuesday that investors, economists, and politicians are concerned that Portugal may be asked by the IMF to present its financing plans one full year ahead before giving more financial aid. The IMF may require new bailout terms, similar in scope to Greece’s bailout terms, if it becomes clear that Portugal won’t be able to make returns to the market by next year. Portugal must regain full access to capital markets by 2013 to help pay down 9 billion euros that are due in September 2013.
Euro Economic Data
Europe’s largest engineering company, Siemens (Germany), showed a 27% profit reduction in their earnings report. Slow down in Europe is making it difficult for Siemens to attain their growth targets.
Private-sector economic activity in the euro zone showed slight but unexpected growth in January.
On Tuesday the Federal Reserve will meet and for the first time give forward looking forecasts for the federal funds rate.
Apple and Yahoo will post earnings on Tuesday. Apple is expected to have good i-Phone 4S numbers. Investors want to know if Amazon’s Kindle Fire sales have hurt sales of Apple’s i-Pad 2 during late 2011. Apple has plans in early to mid 2012 to launch I-Pad 3 with added HD.
Tonight President Obama will make a State of the Union address. He is expected to address his clean energy plans. Google is posting the State of the Union address on U-Tube at 9:00 pm EST.
On Friday, U.S. GDP numbers will be released.