The Greeks give the euro a shot of hope.

* Greece gives it one more try…
* Weekly jobless claims remain below 300k.
* China’s markets halt the free-fall…
* Safe haven flows reverse…

And Now. Today’s A Pfennig For Your Thoughts.

With Chuck off to enjoy a long weekend of camping with his family, the big boss Frank Trotter will start of today’s Pfennig with a few thoughts:

Thursday, July 9th – Somewhere over the American Plains. Today we’re on the company plane, well Southwest Airlines anyway, making our way from the beginning of the route Lewis and Clark started in 1804 to near the end. Instead of following the rivers from Saint Louis to Portland however we’re stopping en route in Austin, Texas. Looking at this on a map might make one think that the route planner’s pen slipped during the planning process but for me the bonus is a broader view of the country from the exit row window seat. I’ll put up with the extra time, and we’ll take the non-stop hop home on Monday.

Throughout this week makes one think that the planners in Europe and China maybe missed a portion of the road map too. Both have been news leaders as the rhetoric and not much else swirls in Europe, and the stock market takes speculators out at the knees in China. By Thursday morning though reasonable calm prevailed. One of the key points of interest in the market right now actually is how little has changed here in the US and really Europe in the past week. The euro remains about the same level, stock markets did react to both problems and two computer glitches, but returned to familiar levels. The US Treasury Note market remains in range. Is Mr. Market telling us to calm down, or is it just that no one knows what will happen next?

Chris again. Thanks to Frank for getting us started this morning. As he suggested, global markets bounced back on Thursday as China’s leaders were able to stop the bleeding and the Greeks put together one last attempt to secure a new round of financing. This new Greek plan seems to have been well received by European creditors, with French President Francois Hollande calling Greece’s reform proposals ‘serious and credible’. The Greek government has proposed spending cuts and tax hikes which are actually more severe than those rejected by voters last week, and in return Germany has for the first time signaled a willingness to support debt relief. But the proposal is far from complete, as it still needs approval from both the Greek Parliament and more importantly the EU creditors. Investors interpreted the move to Saturday of an EU meeting in Brussels as a positive sign, as the meeting was originally scheduled to occur on Sunday. So investors will have to spend another nervous weekend waiting for what everyone hopes will be a resolution to this ongoing Greek drama!

The euro vaulted across the board in early trading, jumping 2 percent against the yen and over 1.35% vs the US$. The largest mover in the currency markets overnight was the Norwegian krone which is up almost 2.5% vs. the greenback (back to a 7 handle!). The Norwegian currency benefitted from both the calming of the Greek crisis and the stabilization of oil prices due to a rebound in the Chinese markets. Other ‘euro wannabes’ rode on the coattails of the common currency with the DKK, CZK, and SEK rounding out the top performers this morning vs. the US$. The risk here is that an agreement is not reached this weekend, as the currency markets certainly look like they have already priced in a ‘done deal’.

The weekly jobs data released yesterday morning showed 297,000 workers filed for unemployment benefits for the week ended July 4th. This was the highest rate of new applications since February, rising 15k from last week’s adjusted figure of 282,000 claims. But the news wasn’t bad enough to derail the good mood of the markets yesterday morning as headlines pointed out the initial claims remained under 300,000 which is seen as an indication that the labor market is improving. This morning we just have some ‘second tier’ data with Wholesale Inventories and Trade sales being reported at 9am. Both are expected to show slight gains.

As Frank suggested in his opening remarks, the Chinese equity market bounced in overnight trading – rallying for a second straight day. I guess that is what happens when government officials tell the largest investors they can’t sell shares. That is one of the major differences between the Chinese markets and the western ones – the Chinese have much more ‘direct’ control over the markets. Don’t take me wrong, I don’t think the Chinese form of government or their ‘control’ of the markets is a good thing; I’m just trying to let you know that when the Chinese decide to make a move they make it, and don’t have to depend on the free markets to react in the manner they wanted. They certainly are beginning to loosen their tight controls -slowly moving toward freer markets, but for now they are using this control to try and stop the bleeding in their equity markets.

The rally in Chinese markets along with the optimism regarding a Greek debt solution have led to selling of some of the safe havens. The Japanese yen was the largest benefactor of safe haven flows recently, and it suffered as these flows were reversed. The yen is down nearly 1% vs. the US$ today and prices of US treasuries (another big benefactor of safe haven flows) are also moving down. The yield on the benchmark 10 year US Treasury note moved from 2.18% yesterday morning to their current level of 2.38%. The precious metals, which traditionally see safe haven flows did not rally due to the crisis and therefore are not seeing any reversal of flows. In fact, the precious metals are actually moving a bit higher this morning, as commodities prices move higher in reaction to the news out of China.

To recap, Greek negotiators have finally said ‘uncle’ and have submitted an austerity plan which the markets believe may actually get approved by the EU this weekend. This caused the euro to jump over in overnight trading and it pulled up the NOK by almost 2.5%. And Chinese efforts to end their market rout seem to be working – further boosting the mood of global investors. The weekly jobless claims increased but remained below 300k. And with an improving sentiment in the markets the safe haven flows have reversed, causing the yen to fall along with the prices of US treasuries.

Currencies today 7/10/15. American Style: A$ .7455, kiwi .6737, C$ .7888, euro 1.1205, sterling 1.5525, Swiss $1.0694 . European Style: rand 12.4227, krone 7.9373, SEK 8.3926, forint 277.55, zloty 3.7252, koruna 24.191, RUB 56.36, yen 122.45, sing 1.3480, HKD 7.7510, INR 63.36, China 6.1153, pesos 15.694, BRL 3.1788, Dollar Index 95.606, Oil $52.78, 10-year 2.39%, Silver $15.45, Platinum $1,030.75, Palladium $652.25, and Gold. $1,159.80

That’s it for today. Chuck let me know he made it safe down to Table Rock lake yesterday – but said it was raining like cats and dogs so that may put a bit of a damper on his annual camping trip. But I know Chuck, and he and his family will absolutely make the best of the situation! I was able to sneak out last night to play a quick 9 holes of golf with my son Brendan. Neither of us are very good at golf, but we both want to try and get better so we have decided to make it out at least once a week – even if it is just for 9 holes on a weeknight. We continue to get more rain here in St. Louis, but I hear the sun will return this weekend which means the temps and humidity will spike moving the heat index into triple digits which is more ‘typical’ for July in St. Louis. I hope all of you have a Fantastic Friday, and a wonderful weekend – thanks for reading the Pfennig.

Chris Gaffney, CFA
EverBank World Markets