One of the drawbacks of reporting financial news is that there are times when huge macro economic events completely dominate the financial news landscape. Greece and the Euro problem are THE issue of the moment and the markets and the mainstream and financial media just can’t move past the subject. “The only story that matters is Europe,” Jack Ablin, chief investment officer for Chicago-based Harris Private Bank, which oversees $55 billion, said in a telephone interview with Bloomberg. “Central banks can provide liquidity, but they can’t solve structural imbalances, I have an uncomfortable level of cash, but there are very few tranquil places to hide.”
In a very watchable video from Reuters the view is broadcast that Euro bonds are not the answer. The opinion put forward is that euro countries aren’t going to agree to guarantee each others’ debts in time to solve the crisis and once over, neither euro bonds nor fiscal union is desirable. Market discipline is the only solution.
Stocks pared initial losses after Greek officials reported that discussions with European officials about the country’s financial bailout were productive. The SPX 500 lost 0.9 percent up to 3:30 p.m. New York time, after falling as much as 2.3 percent in earlier trading. The SPX 500 had lost up to 18 percent since April 29 on concerns that Europe’s crisis would hurt any sustained global economic recovery. The index rose 5.4 percent last week, the third-biggest rally since 2009, after central bankers said they would provide dollar loans for European lenders.
The Greek Finance Ministry reported in an e-mailed statement that the conference call this evening, between Minister of Finance Evangelos Venizelos and senior representatives of the European Central Bank, European Commission and International Monetary Fund was “a productive and substantive discussion.” The teams of technical experts in Athens “will further elaborate on some data and the conference call will be repeated tomorrow at the same time.”
Whilst the SPX has clawed back some of the lost ground from early trading European bourses had already taken a substantive hit due to the multi faceted Euroland issues. The STOXX closed down 2.93%, the CAC closed down 3%, the DAX closed down 2.83% and the UK ftse closed down 2.03%. Gold lost circa $30 an ounce and Brent crude is currently flat. The Euro has lost circa 1% versus the yen and dollar and cable is down 1%. Cable has lost circa 800 pips since the beginning of the month. Whilst most of the focus has centred on the Euro over recent weeks cable and sterling has slipped under the radar, sterling has collapsed versus yen.
President Barack Obama laid out a $3 trillion (1.91 trillion pounds) plan on Monday to cut U.S. deficits by raising taxes on the rich, but Republicans rejected it as a political stunt and made clear the proposal has little chance of becoming law. Vowing to veto any plan that relies solely on spending cuts to reduce deficits, the Democratic president’s recommendations set the stage for an ideological fight with Republicans opposed to tax increases that will stretch through Election Day 2012.
“I will not support any plan that puts all the burden of closing our deficit on ordinary Americans,” Obama said. “We are not going to have a one-sided deal that hurts the folks who are most vulnerable.”
In overnight early morning trading the yen and Aussie dollar may be affected by the release of the RBA minutes and other key Japanese data. The key euro data to be published at 10 am gmt will (once again) be subordinate to the huge macro economic issues being played out.
02:30 Australia – RBA Meeting’s Minutes June
06:00 Japan – Coincident Index July
06:00 Japan – Leading Economic Index July
06:30 Japan – Department Store Sales Aug
08:00 Japan – Convenience Store Sales Aug
10:00 Eurozone – ZEW Economic Sentiment Sept