Both stocks and precious metals were mostly flat this morning as all eyes turn to the ongoing talks between Greek officials and eurozone finance ministers. There continues to be mixed signals from the negotiations, with pressure being put on the Greeks to soften their stance against austerity by a German-led group, while the U.S. and others are sympathetic to Greek's precarious position. The finance minister from Malta even remarked of Greece, "If you want to leave [the euro], leave." Although European shares have been advancing with the continued expectation that a deal will be reached, the reality is it a bit more shaky. U.S. indices opened about 0.5% in the red while gold and silver were flat. Platinum is lagging far behind just above $1,160/oz. The big stock news yesterday was the Wal-Mart shares tumbled more than 3% after the corporate giant announced it would be raising wages for a large portion of its employees over the next two years.
Yesterday in the Markets
The precious metals rose modestly yesterday, snapping their losing streak this week. Stock indices fell marginally on low volume despite the release of positive jobs data, while 10-year T-notes stayed parked around 2.08% yields.
Factors Affecting Gold Today
The attention remains fixed on Greece and its request for an extension of its EU bailout. To save face domestically, Tsipras and Varoufakis continue to insist that they will not accept more austerity measures; at this point, it has become a political game of reaching an agreement that does not cause an uproar in Greece, where voters would likely feel betrayed by their newly-elected leaders if they simply capitulate to the rest of Europe's demands. The bloc of Northern European countries led by Germany were unsatisfied with the language of Greece's most recent bailout extension proposal, citing the ambiguity of the document as leaving too much wiggle room for the Greeks to skirt on their obligations in a potential deal.
It's been reported that Greece currently has enough cash to run the government through the end of March. Germany's fierce opposition to the Greeks, evidenced by the war of the words throughout the week, has not dampened most investors expectations that a deal will be struck. European shares have advanced to a 7-year high amid signs that the region's economy is strengthening. Both Germany and France showed solid growth so far in February. Although there has been $1 billion in outflows from bank deposits in Greece, the country's bonds have risen for three straight days. The euro remains steady (though lower) at $1.13. With no resolution expected before the weekend, talks between euro area leaders will likely extend into at least Monday.
It is true that most global markets have not been particularly phased by the Greek situation, with trading remaining within normal ranges. Asian shares remain up for the most part as the Japanese economy appears to be finally emerging from a prolonged recession. The Nikkei continues to push toward new highs, and the yen is trading near 118 to the dollar. With the Lunar New Year holiday now in full effect, Chinese shoppers on holiday are spending money in Japan and the surrounding countries, a solid indication for consumer spending.
Oil prices are mixed this morning, with Brent crude up 40 cents and WTI down by the same margin. The two crude benchmarks have been sliding all week on a mix of concerns: the United Steelworkers strike of refinery workers is still at a stalemate, causing the worst labor disruption in the industry since 1980. At the same time, the EIA reported another record-high inventory of petroleum this week. These developments are especially dragging on WTI crude, which has slid below $51/bbl, while Brent crude has been more steady, remaining above $60/bbl.
The status of talks between Greece and Europe will be closely watched next week. A slew of economic data will come out Monday, with PMI Services Flash, existing home sales, and the Dallas Fed Manufacturing Survey all released in the morning.