Surprise Budget Agreement Met With Yawns: Morning Market Update Dec 11

December 11th, 2013 by

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Gold is near unchanged after softening slightly over night from its 3-week high gained yesterday. Silver followed basically the same program, while the PGMs start the day in New York near yesterday’s closing levels.

The announcement of a bipartisan budget deal in Washington yesterday afternoon came out of the blue, as everyone was expecting the usual bickering and finger-pointing and last-minute crisis. On further inspection, the agreement ignores major issues of contention, such as entitlement cuts and closing tax loopholes. Basically, it’s just a starting point for further negotiations, rather than an actual budget.  Pundits still declared it good enough to increase the chance of a tapering of the Fed’s $85 billion a month “money printing” program.

Wall St. opened flat, then dropped steeply into negative territory this morning.  The only global stocks posting gains so far today are in Europe. Talks in the EU are progressing over a standard agreement on how to unwind “bad banks” in the future, ahead of financial integration plans among the member nations. Banks in the EU are repaying emergency loans from the ECB early, that were taken out at the height of the financial crisis, as they prepare for the “stress test” of their health.

The dollar is sharply down after a volatile up-and-down night between the green and the red The boost it got over the initial news of a budget deal have evaporated, though it is mostly unchanged against the yuan. The euro is still near 6-week highs versus the dollar, and 5 -year highs versus the yen. The yen strengthened a bit yesterday, as a result of large hedge funds squaring books and taking year-end profits. This sent most Asian shares lower.

Chinese and Hong Kong stocks suffered greatly on the news that the mainland government will be curbing coal-fired power plants in an attempt to reduce the life-threatening air pollution that is choking their cities.

Gold is holding the $1260 mark this morning, but further short-term upsides may depend on short-covering or major economic news. Both equities and precious metals seem to be tuning out the “taper talk” now, after having it dominate their thinking for almost the whole year.

 

by Steven Cochran

Gainesville Coins Portfolio Tracker and Financial News