Gold, Guest Editorial, Markets, Resource News
rI at the close, May 8, 2012
By Resource Intelligence · May 8, 2012 · 1:44 pm · Leave a Comment
Greece struggle persists, markets tumble, Greece at lowest level since 1992
The consequences of lending to PIIGS took a graver turn this week as markets tumbled with increased fear of a Greek default on its debts.
Greece has made its own bed with its epic inability to choose a clear governing party and may yet have to go back to the polls. The country appears, at least in an economic sense, to be rudderless and threatening to capsize without clearer leadership at the helm.While the Financial Post reports that Germany will not abide any retreat from austerity, the Globe & Mail takes the news in stride, noting that the bond market shows little sign of contagion.
“While the yield on 10-year Greek government bonds has jumped 39 basis points today, to an eye-popping 22.25 per cent, most other countries’ borrowing rates are stable. The yield on French 10-year notes edged up seven basis points to 2.795. But German, Dutch, Swiss, Norwegian, Danish, Belgian, Austrian and Finnish rates all declined,” Canada’s national paper noted.
Nevertheless, the Toronto stock market tumbled more than 200 points Tuesday, before recovering somewhat in the afternoon, having dropped a net 1.59% or 188.41 points (to 11,672.24) within an hour of the market’s close.
The TSX Venture Exchange took a bigger hit, dropping 4.17% or 58.3 points to 1,339,12 within an hour of the close as well.
The S&P 500 index shed 15 points, or 1.1%, to 1,355 in Tuesday afternoon trading, falling for the fourth day in five and hitting a two month low.
The Dow Jones Industrial Average fell 142 points, or 1.1%, to 12,869 sliding for a fifth straight day.
The Nasdaq Composite lost 33 points, or 1.1%, to 2,925 and hit its lowest intraday trading level since February, reports WSJ.
In Europe, The Stoxx Europe 600 index sank 1.7%. Greece’s ASE Composite Index closed at its lowest level since November 1992, dropping 3.6%. The U.K.’s FTSE 100 fell 1.8% turning into the red for the year.
In the meantime, gold dropped to a session low, sliding 2% to below $1,600 per ounce. Reuters suggests further downside is possible based on the price breaking through a series of “technical support levels.”
“Spot gold dropped 1.9 percent on the day to $1,607.70 an ounce by 3:16 p.m. EDT (1916 GMT), its largest daily decline in a month. It hit a session low of $1,594.94 an ounce, its cheapest price since January 4.
“Gold’s has declined $180 from its 2012 high of $1,790 on February 29 after Fed Chairman Ben Bernanke did not hint at a third round of government bond purchases, or quantitative easing, which has underpinned the metal. A strong run of U.S. economic data has further reduced hopes for U.S. monetary easing.”
As Greece’s indecisiveness plays havoc with global markets, it may behove Europe’s leadership to finally take a stand and remove Greece’s untenable debit (if not the country as a whole) from the eurozone entirely.
Europe must turn its attention to the real problems at the root of its present situation, particularly the flaunting of the basic debt load stipulations of the Maastricht Treaty.
