The government of Cyprus allowed banks to reopen today under strict controls, so citizens could get money to buy food and pay bills. Daily withdrawals are limited to €300. The general atmosphere seemed resigned, but calm, as TV camera crews focused on lines at ATMs across the island nation. This seemed to reassure the European stock and currency markets, which recovered from earlier losses.
The unease is still affecting Italian and Spanish bonds, as their yields continue to rise, but German bund yields also rose a bit as the demand for safe haven assets eased a bit. German bunds, the U.S. dollar and the Japanese yen had all seen significant inflows as investors sought safe haven from the uncertainty over Cyprus possibly leaving the Euro. German bunds may also have been affected by a rise in unemployment reported today.
The U.S. also received unhappy unemployment news today, as first time jobless claims unexpectedly rose by 16,000. 357,000 new-unemployed people filed for unemployment last week. A lot of fourth quarter economic news was also released today. 2012 Q4 GDP rose at a 0.4% annualized rate, revised upward from 0.1%. Q3 GDP had been 3.1%. The large drop is attributed to the huge drop in military spending in Q4 that was brought about by the “fiscal cliff.” Total GDP for 2012 was calculated at 2.2%.
The dollar hit yet another 7.5-month high yesterday, and there is some profit taking going on today which has the dollar trending slightly lower. Oil futures hit a 5-week high overnight.
Today is the last trading day of the quarter in the U.S., Europe, and China, and is the trading day of the year in Japan. Some market movement will be from book-squaring ahead of the Easter holiday in the U.S. and Europe.
The Nikkei was down 1.3% on year-end profit taking and pressure on exporters who are exposed to the Euro market downturn. Chinese stocks slumped, drug down by banks as the government demanded more transparency from banks regarding wealth management products.
Precious metals are weaker today (with the exception of palladium) as panic and worry over Cyprus setting off a chain reaction in Europe has diminished today. Outflows from ETPs continues as money is pulled out to chase the new highs being hit by the stock market, but there are signs that physical buying may be picking up in Asia. Long-term investors should remember that ETPs are attractive to short-term positions in gold because of its liquidity, allowing people to jump in and out.
Gold has seen a stubborn resolve to trade in a tight range, no matter how good or bad the news for precious metals may be. Markets in the U.S. and Europe will be closed tomorrow for the Easter holiday, and European markets will also be closed Monday.