Global stocks got a boost this morning when the late proposal presented by the leftist Greek government to a council of EU finance ministers sparked hopes of a last minute rescue of the devastated country.
Gold fell moderately to retest the $1186 support level, while silver gained modestly. Prices on major nation debt also fell in the risk-on atmosphere, with yields rising on U.S., German, French, and British bonds. Crude oil futures fell on worries over OPEC oversupply.
Yesterday in the Markets
Investors pulled back into a defensive posture on Friday, ahead of today's summit meeting over the Greek crisis. Wall St., gave up most of Thursday's gains, down .5%. Bond prices rose, with the yield on the 10-year T-note dropping to 2.26%, and the German 10-year bund's yield falling to 0.75%.
Oil closed lower as Saudi Arabia announced that it was ready and able to increase production if demand increased, to choke out the U.S. fracking industry. Gold was down less than $2/oz Friday, holding on to nearly all of Thursday's monster gains and closing at $1200, up for the second week in a row.
Factors Affecting Gold Today
Today's big news is of course a new proposal presented by the leftist Greek government to EU finance ministers today. For the first time, they have agreed to a reform of the Greek pension system, a key sticking point, gradually raising the retirement age from 50 to 67. While one anonymous Greek official was quoted by Reuters as saying, "This is now, for the first time, a reasonable paper on which you can have an informed and productive discussion."
However, the EU council of finance ministers and German chancellor Angela Merkel quickly acted to dampen any "irrational exuberance." Finland's finance minister said “This seems to be a little bit of a Monday where we have wasted a lot of air miles both on the finance ministers’ side and on the prime ministers’ side, because I don’t foresee a breakthrough today." Part of the reason for the downplaying of expectations is that there were multiple versions of the proposal put forward by the Greeks, and no one is certain which is the "real" proposal. The reason for muddying the waters at this final juncture was unknown.
The European Central Bank bailed out Greek banks for the third time in less than a week, but Austrian central bank president Ewald Nowotny, who sits on the ECB board of governors, said that this latest move was only cover Greek banks for today. "This credit is advanced until the end of today and whether we can continue to extend it depends on our rules as well as the result (from negotiations) today."
Tomorrow, in addition to the "Final Countdown" for Greece, the markets will be digesting PMI reports from China, France, Germany, the EU, and the U.S.
Other important economic reports in the U.S. tomorrow are New Home Sales and Durable Goods Orders.