Greek relief rally proved short lived
Arne Treholt Vice-President of Business Development and Investments
The relief rally after the Greek elections on Sunday proved short lived. Already few hours into Monday’s trading the positive sentiment, which saw Asia and oil prices raise, turned soar.
Markets were back to normal reacting to the worldwide consequences of the European sovereign and banking crisis. As a worrying sign, interest rate on Spain’s 10 years bond surpassed the critical 7 % threshold, giving a dark reminder of what happened when Greek bonds jumped to 7 % a couple of years ago.
Oil prices dropped back to year’s low. Brent trading at 96. The Euro/USD which reached 1,27 during morning’s trading yesterday fall back to 1,2613 confirming the long term downward trend of the Euro.
The pressure on a Greek exit is temporarily gone. Greece shall probably be able to form a coalition government between the center parties, New Democracy and Pasok, today. But if the new government shall be able to keep, at least, a minimum of credibility towards their electorates, the new Premier, Antonis Samaras, would have to ask and also be given some token concessions from the “troika” of ECB., IMF and EU. Without such concessions and easing of austerities, Greece is going to face a new long and very hot summer in the streets.
After the German Foreign Minister and Brussels had indicating some willingness for concessions, Angela Merkel was on the eve of the G-20 meeting in Mexico steadfastly against giving any concessions. She is, however under strong pressure. The leaders of the 20 strongest countries have urged Europe to take steps to resolve its debt crisis. As a token of their willingness to contribute to a solution, two of the leading BRIX-countries, China and Russia, stated that new billions of dollars would be put at the disposal of IMF, the International Monetary Fund. Christina Laggard, the head of IMF, stated that USD 450 billion would be kept as a contingency for Europe.
The dollar is trading weaker after the last events on expectations that the US Federal Reserve would introduce new stimuli to its stagnating economy.
JPY is stronger, creeping below the 79 mark against the USD.
Gold prices are as silver slowly edging upwards; confirming a trend seen over the last weeks where precious metals again are sought as a safe havens during market upheavals and big volatility in the currency markets. Gold is up 7 % over the last month.
Copyright: United World Capital