The dollar is showing some volatility this morning, oscillating just above unchanged. The euro is up slightly, but still near eight-month lows.
Some of the easing in safe haven demand is coming from the news that the Portuguese central bank has taken over Banco Espirito Santo in a $6.6 billion bailout. All the good assets are being moved over to a newly-created bank, Novo Banco, which the Bank of Portugal will capitalize. Depositors and holders of unsubordinated bonds are unaffected, but subordinated bondholders are left in the old, bad, bank, with the “toxic” loans. Officials have stated that they will be going after the senior officers of Espirito Santo to hold them personally liable for the bank’s failure.
This news has helped European stocks halt their slide, and Wall St. opened higher as well. The S&P 500 is coming off its largest weekly loss since June 1, 2012. The fall in the index Thursday and Friday has wiped out all gains for 2014. All stock indices across the world were in the red Friday, but all major markets except Japan are seeing some “buy the dip” behavior.
Friday’s non-farm payroll report, which missed expectations, was still over 200,000, but markets don’t seem as afraid today of an early Fed rate hike as they were Friday.
In other news. Israel declared a unilateral ceasefire as it starts pulling ground troops out of Gaza. The IDF says that its mission of hunting down and blowing up infiltration tunnels that led from Gaza into Israel is nearly done.
On the “doom” front, seven people suspected of being infected with the ebola virus have been discovered in the Philippines. This is the first indication that the deadly virus has escaped Africa in this latest outbreak.
Both precious metals and equities are experiencing thin volumes, as usual for the summer. Stocks are likely to be driven mostly by earnings reports this week. Metals should continue in a tight range this week, unless new geopolitical crises emerge, or a big trader/entity decides to use the thin volumes to move the market.
Both equities and metals will be vulnerable of any out of the ordinary economic news that may put the timing of the Fed rate hike into doubt.