The stock markets were set to move higher on the release of a pair of strong data points for the U.S. economy: new jobless claims held below 300,000 for the 16th consecutive week and consumer spending rose at its fastest clip in six years during May. This also drove crude oil prices and the precious metals slightly lower at Thursday’s open. Expect global markets to remain somewhat quiet until there are clearer signs about which direction Greece will go–either reach an agreement with its creditors or hurtle closer toward default and an exit from the euro. At this point, this not much time left for the outcome of the country’s debt crisis to begin to take its course.
Yesterday in the Markets
Wednesday saw U.S. indices slump, with the Dow Industrials leading the way at 1% lower. The precious metals were mixed as platinum (+$7) and silver (+5¢) gained while gold (-$4) lost slightly and palladium remained largely unchanged. Markets in Shanghai bounced back by closing 2.5% higher, while Japan’s Nikkei 225 saw its highest close since 1996. The other big news was the upward revision of Q1 GDP to only a 0.2% contraction.
Factors Affecting Gold Today
All eyes will remain on Greece, which hopes to finally hash out a deal with its creditors at the 11th hour. The finance ministers of the euro area will be meeting today at an EU summit. The looming Greek question promises to be a subject of intense discussion, partly because the rest of Europe is just as eager–probably more eager, given Greece’s incentives to drag things out–to get some agreement, any agreement, secured in order for about €7 billion in emergency aid to be disbursed to the cash-strapped Greek government.
Though this seems to be a weekly occurrence, the markets in the U.S. and abroad are likely to hold back fro any major movements either direction until a bit of clarity comes to Greek debt situation. Developments are fluid, and although some decision is certainly nearing, it remains up in the air as to which direction the negotiations are leaning. A fresh accord would certainly spell a rally for global bonds and European stocks, while the absence of a deal with the dual June 30th deadline approaching (Greece’s debt repayments come due for both the IMF and its European counterparts) will undoubtedly spur a flight for safe havens; with rising volatility and already-low yields in government bonds of late, gold stands out as the only viable safe haven investment left.
As is typically the case, Wall St over-exuberance in response to the jump in consumer spending and the solid jobless claims data will likely cap any downturn caused by a continued Greek impasse. In such an event, expect the euro to quickly unravel into closer parity with the dollar, while its closest peer currencies, the USD and the Swiss franc (CHF), will almost undoubtedly surge as a result.
At any rate, the circus over Greece’s possible default is pushing other otherwise relevant stories to the margins, such as the increasing pace of mergers and acquisitions; the crowding of the field of candidates for the GOP presidential nomination; and the uncertain prospects for China’s overheated stock market.
The latest gauge on U.S. consumer sentiment will be announced at 10 am ET, while the M3 money supply for the eurozone will also be released. Italian business and consumer confidence comes out, as well.