Gold and silver are both up over 1% from yesterday’s close and oil touched a 14-month high overnight, as drama in Europe and bloodshed in Egypt spook markets worldwide.
Egyptian president Mursi has defied the military’s deadline for resolving the concerns of millions of protesting citizens, as 18 people die overnight in clashes between Mursi’s Islamic Brotherhood supporters and protesters.
In Europe, the pro-austerity government in Portugal is expected to fall at any hour, after the finance and foreign ministers’ resignations, and rumors that two more cabinet ministers are preparing to leave. Since agreeing to an austerity program to secure an EU bailout, Portugal’s economy has seen serious contraction, and unemployment has skyrocketed, leading to large protests. It is widely expected the anti-austerity opposition party will win power in new elections when the present government collapses.
Greece is expected to miss Friday’s deadline for reforming its public sector, which will break the conditions for further bailout money from the EU. Without this money, Greece will default on its obligations. Italian and Spanish bond yields spiked as investors dumped them for the safety of German bunds. The euro currency hit a five-week low, breaking below 1.30, but the dollar isn’t seeing any benefit from the fall.
The dollar index is down sharply after hitting a five-week high overnight, and the yen has strengthened to 99 versus the dollar.
In Asia, Chinese service industry PMI was recorded at 53.9, down from 54.3 in May. This led all Asian markets down, with Hong Kong seeing the worst day in two weeks, dropping 2.5%.
In the U.S., Wall St. opened lower on the news from Europe and Egypt, but recovered on good domestic economic data. The first numbers were not so good, as the ISM service index fell to 52.2, the lowest since February 2010. Experts were expecting a slight increase from May’s 53.7 to 54 even.
The ADP payroll report said that American businesses added 188,000 new jobs in June, 28,000 better than expected (be aware, however, that the ADP report is usually more optimistic than the official government numbers.) In a similar vein, first-time jobless claims recorded 343,000 newly-unemployed, a 5,000 increase from last week. The four-week rolling average of first-time claims was essentially flat at 345,500.
Markets in the U.S. have a half day today, and will be closed tomorrow for Independence Day. When traders return on Friday, they will have the Bank of England and ECB meetings to pore over, as well as the next page in the Euro bailout saga going south and either a coup or civil war in Egypt.