Markets still wary of Europe’s worries
City Index May 16, 2012 5:35 PM
<p> Markets are still uneasy around the political situation in Europe with Greece now expected to go back to the polls after elected […]</p>
German Finance Minister Wolfgang Schaeuble called the vote a referendum on whether the country stays in the euro.
Meanwhile German Chancellor Merkel and French President Hollande say they will consider measures to spur economic growth in Greece as long as voters there commit to the austerity demanded to stay in the euro.
So for now, the market is starting to accept the current Greek deal is unlikely to survive in its current form and a best case scenario would see more concessions.
A worst case scenario is not being priced into the market but a new dangerous level of political discussion is growing – Greece’s elected and increasingly popular left leaning politicians argue the Euro zone is unwilling to let Greece go and so better concessions should be negotiated.
The market might find this a little too overbearing, putting more pressure on risk assets in the near term.
The Euro is finding little support, last trading at 127.36 US cents. The Australian dollar remains below parity, last at 99.43 US cents.
Commodities continue to trend lower with copper leveling at US$3.50/lb while gold is yet to find any meaningful bounce, last struggling at US$1544/oz. despite the fall in gold.
The gold/silver ratio – which is market neutral in natural, is back above 55x, rising from around 51x over the past few months and now within its two decade average.
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