Gold faded in Asian trading overnight, but saw a sharp rise in European trading bring it back to Friday’s levels. However, a sudden surge in the dollar (after it hit a 5-week low overnight) sent gold down $5 to trade around the $1,330 mark. Silver pretty much mimicked gold, but with its characteristic volatility.
Asian stocks fell after China announced that net income for the manufacturing sector fell 60% in June compared to May. The drop to 6.3% from 15.5% may in part be due to the government’s smoking out of grey market loans by large firms to smaller firms. Many large companies were using their great credit rating to make under the table loans to smaller companies at a large profit.
The Nikkei dropped on a strengthening yen and disappointing earnings, and Hong Kong shares were drug down by banking stocks, as the government orders an audit of local government debt.
Euro stocks were up as the euro currency weakened slightly. The big financial news on the Continent today was the European Commission’s rejection of the restructuring plan of scandal-ridden Monti dei Paschi Bank, Italy’s third-largest bank. The 500 year-old bank has so far refused to cut executive salaries and expenditures enough to qualify for the desired $4 billion bailout by the EU. This led to some safe haven demand for gold in Europe.
Stocks are down on Wall St., as existing home sales dropped 0.4% from a seven-year high. This was actually less than the 1% drop analysts had expected. Some traders are starting to think that the market has put in a top, and are hitting the sidelines until all the big economic news is released this week.
Speaking of upcoming economic news, expect a wild ride this week as the Fed Open Market Committee meets through Wednesday, the ECB and Bank of England meet Thursday, US employment numbers are released Friday, and Chinese manufacturing data is released. All of this data hitting a market with very thin volumes will make for volatility. President Obama mentioned yesterday that he wanted the next Fed Chairman to focus more on employment, as well as shepherding interest rates. This should affect the notion that the Fed will start reducing its $85 billion a month in bond purchases in September, as some have surmised.