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.