Markets put Greece behind them
Although a resolution on extending further credit Greece is yet to be finalised, markets are acting on the assumption that it’s a foregone conclusion.
Acting on the assumption that the risks associated with Grexit are behind them, markets have refocussed on adjusting to a world of gradually rising interest rates, led by the US Federal Reserve. This has seen bond yields and the $US on the way up again in international markets.
US 30 year bond yields rose to test the highs of two weeks ago above 3.2% while the Australian 10 year bond yield is again back over 3%. Share markets however, appear to be unfazed by the latest move towards higher interest rates. In the case of the Australian market this may reflect the fact that “yield” stocks like the major banks have already fallen significantly as investors positioned for a world of higher US interest rates. Stock markets appear to have factored in an allowance for somewhat higher bond yields so provided yields don’t rise too far too fast, share prices may not be unduly concerned by the current bond market adjustment.
Gold is looking like a casualty of adjustments in credit and currency markets. The stronger $US is a negative for gold prices as is the prospect of increased funding costs associated owning gold due to higher interest rates. At the same time a benign inflation outlook together with reduced risks in Europe are providing limited incentives for investors to own the precious metal.
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