Stocks are climbing this morning after yesterday’s EU summit in which the leaders of 25 European governments agreed on a pact for a tighter fiscal union, and signed off on the details of a permanent bailout fund for the euro-zone. EU leaders noted “tentative signs” of economic stabilization, but said tensions within the financial markets continue to weigh on the economy. After the summit, Greek Prime Minister Lucas Papademos met with senior European officials regarding the conditions to be imposed on Greece for it to receive financial aid. Afterward, Jean-Claude Junker, Luxembourg’s Prime Minister who attended the meetings, claimed the talks yielded no conclusions. Mr. Papademos said that Greece would continue negotiations with private sector creditors this week with a goal of reaching a deal that would not require further financing from official lenders. “It’s hard to predetermine if we will need additional financial support. Our intention is to avoid it,” Mr. Papademos said in a press conference.
U.S. stock market futures are up this morning as sentiment improves in the euro-zone after yesterday’s EU Summit and amid better than expected earnings. Eli Lilly advanced 1.2% after it reported earnings at $0.87 per share in the 4Q, compared with the average analyst estimate of $0.81. The world’s largest drug maker, Pfizer Inc., increased 1.3% after beating analyst estimates as the company’s non-pharmaceutical divisions helped make up for sales lost on its best-selling drug Lipitor which is coming under pressure from generic competitors. Archer-Daniels-Midland, the world’s largest grain processor, posted a 2Q profit that missed analyst estimates due to rising corn costs and lower than expected oilseed earnings; ADM was off 3.1% in early morning trading.
I recently wrote about the MOVE Index (Merrill Lynch Treasury Volatility Index) hitting near lows not seen since before the financial crisis began, but in the last several days we have seen a move even further to the downside. Back on Jan. 18, the index was as low as 75bps, but we have broken that level of support and the index now trades at 72.4bps. Low volatility in the treasury markets may currently indicate investors unwillingness to shed their safe-haven dollar denominated assets.