A soft dollar this morning has analysts expecting a fairly strong day in the green for U.S. stock indices. The dollar pulled back more than 0.4% this morning to 94.7 on the DXY index, helping the euro return to about $1.13, while the yen has strengthened considerably on positive comments from the Bank of Japan's governor, nearing 122 per dollar. Much of the international community's attention remains trained on Greece's debt situation, however.
The precious metals opened notably higher across the board this morning, with silver adding about 20 cents to steady above the $16 mark, and both platinum and gold advancing more than $10 each.
Yesterday in the Markets
Stocks recovered from early losses on Tuesday, but closed essentially flat. The S&P 500 gasped to a finish barely in positive territory, snapping a 3-day losing streak for the index. The Dow Industrials and the Nasdaq ended mostly unchanged, with the latter losing 0.15%. European shares were down for 6th day in a row, partly on anxiety over an unresolved Greek situation.
Tuesday's JOLTS report showed that job openings hit a record high in April, once again inflaming fears of an earlier-than-expected rate hike by Fed. Meanwhile, both crude benchmarks gained nearly 4% yesterday following the prediction from the Energy Information Agency that shale production will drop by 91,000 barrels per day in July.
Factors Affecting Gold Today
More investors are behaving as if the market has topped out, moving into defensive trading positions to avoid any major losses from an unexpected downturn. Both 10-year Treasuries and German 10-year Bunds were both down again; yields rose 6 basis points for the former, closing at a 7-month high of 2.44%, while the benchmark Bund yield rose 7 basis points to 0.95%.
A glance at emerging market stocks reveals that it is not only bonds from these countries that are consistently described as being in a "bond rout" at the moment. The only truly exuberant stock indices abroad of late have been in China, where margin buying has fueled an incredible bull run. Yet, even the Shanghai index fell by more than 2% on the news that MSCI would not be adding blue-chip Chinese stocks to its widely tracked index for emerging markets. Aside from the beleaguered Brazilian and Turkish indices, which did settle into the green, global markets were in the red. The drying up of safe, liquid positions in the markets is spilling over from bonds into stocks, giving investors even less reason to move into these assets.
The other big international narrative is the ongoing negotiations between Greece and its European creditors. As German Finance Minister Schaüble moves further from the center being held by Chancellor Angela Merkel, the pressure mounts on Greece to offer a substantial reform proposal to the IMF, ECB, and EC before its current bailout assistance expires at the end of the month. Greek Prime Minister Alexis Tsipras has not been able to hold his tongue in making what amount to extortion threats, recently warning eurozone taxpayers that a Greek exit from the currency union would trigger a domino effect of Spain and Italy also leaving the euro.
Tsipras is meeting today with Merkel and French President Francois Hollande in the hopes of bringing the Greek side closer to a deal that keeps the country within the EU sphere. The French finance minister, Michel Sapin, told French parliament that they cannot be bullied by the Syriza administration's tactics: "The dialogue is continuing, it is difficult, there can be neither diktats, ultimatums nor blackmail, neither on one side nor the other." Merkel has been equally frank with the Greek contingency, essentially calling for good faith negotiations. Whether or not Greece heeds their advice will remain to be seen.
Retail sales numbers and weekly jobless claims data will likely move the markets on Thursday. Business inventories as well as import and export prices will also be released in the U.S.