Greece no longer contagious
Greek bonds and shares were smashed in overnight trading as the parliamentary vote for a new president failed. Despite this looming economic disaster, shares rallied across Europe and US share indices hit new highs as markets collectively concluded that Greece is no longer economically contagious. However, mixed news from commodity markets makes for a difficult opening call for Australian investors.
The Greek economy now contributes less than 1.5% to EU GDP, making it far too small to matter in the context of the global economy. Participants from the ECB to individual investors have had ample opportunity to gauge and anticipate further problems, and structures such as the EMS give comfort that any fall out can be contained. The Greek economy is heading towards disaster like a car crash in slow motion, fuelled by the unfunded fairyland promises of politicians, but the damage is likely limited to Greece itself and a few adventurous investors. The lack of action in EUR/USD trading illustrates the unsurprising nature of the latest developments.
The picture for local traders is far from clear. Resource stocks led yesterday’s stunning rise, yet overnight action may see these gains eroded. Precious metals dropped alongside a weakening oil price. In contrast, iron ore and copper rose. These mixed signals from commodity markets mean a cautious start to trading is likely, notwithstanding the overall positive global sentiment towards shares.
For further comment from Michael McCarthy at CMC Markets please call 02 8221 2135.
Frequently Asked Questions about this Article…
Greek bonds and shares were heavily impacted due to the failure of the parliamentary vote for a new president, which heightened concerns about the country's economic stability.
Despite Greece's economic challenges, global markets have largely concluded that Greece is no longer economically contagious, as evidenced by the rally in European shares and new highs in US share indices.
Greece's economy contributes less than 1.5% to the EU's GDP, making it relatively insignificant in the broader context of the global economy.
Structures like the European Stability Mechanism (EMS) provide reassurance that any fallout from Greece's economic issues can be contained, minimizing broader impacts.
Commodity markets are showing mixed signals, with precious metals and oil prices dropping, while iron ore and copper prices have risen, indicating a cautious start for traders.
Australian investors face a challenging opening due to mixed signals from commodity markets, despite the overall positive sentiment towards global shares.
The lack of significant movement in EUR/USD trading suggests that the latest developments in Greece were largely anticipated and unsurprising to market participants.
For more detailed commentary on the market conditions, Michael McCarthy from CMC Markets can be contacted at 02 8221 2135.
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