Stocks moved higher for the 7th day in a row as the Dow gained 16 points to 18,533 on light trading volume. Gold closed up $2.60 an ounce to $1,330 as tensions in Turkey or “TT” caused the Turkish market to drop over 5%.
Things in Europe continue to fill the headlines. Turkey experienced a coup which is allowing President Erdagon to purge critics and grow his power base. The rest of the EU is a bit nervous over this latest development since it might signal a move by Turkey away from secularism to a more theocratic Islamic style of gubment. Meanwhile in Italy, banking authorities are apparently working on a $50 billion “bad bank” deal to get toxic loans off the books and stabilize the banking system. At the center of the scheme is none other than US based bank JP Morgan which is working with banking authorities on implementation. The only problem is the EU might not allow the deal since it violates EU banking rules. The deal shows however the possible ways in which US banks could profit from stress in Europe.
Things occurring in Europe indicate that global markets are becoming compressed in the sense that coups, bank issues, negative interest rates and rising tensions are causing foreign investors to pull money from those spots and seek relative safety in places like the US and gold. It will be interesting to see how this trend plays out.
Speaking of US banks, Bank of America reported 2Q numbers today that, while lower than this time last year, managed to beat estimates. While revenue was off 7% and net income was down 19% underlying operating strength was good, book value grew and deposits ($71 billion added in 2Q) continued to rise along with loan growth. Shares were higher on the news as gurus view the growing gap between B of A’s share price and book value as a possible opportunity.