Market Outlook for February 9, 2012

European finance ministers have convened an emergency meeting in Brussels today as the Greek government continues to struggle to finalize of terms of its next rescue package. The ministers will meet with IMF chief Christine Lagarde but no agenda has been announced. Meanwhile, the caretaker government led by Prime Minister Papademos is locked in intense talks with its coalition partners to finalize terms on the package which is crucial if Greece is to meet a EUR 14.5 billion bond payment on March 20. Papademos is also holding talks simultaneously with the so called ‘troika’. In the absence of further developments the EUR has firmed to trade at 1.3260.

The unprecedented action by central banks around the world to intervene in the markets has clearly impacted in a positive way on volatility in the markets. The move by the Federal Reserve to announce that it will keep interest rates low until 2014 and the action of other institutions globally to increase liquidity in the financial markets has seen volatility reduce significantly this year. The risk on/ risk off moves encountered last year with multi percentage moves in assets prices on what seemed like a weekly basis have now subsided. Investors appear happy to undertake a wait and see response. The Australian dollar continues to perform extremely well in this environment and opens today at 1.0800.

Central bank action and intervene have clearly impacted on share market volatility. Once again markets were relatively subdued. The Dow Jones is still trading at its highest levels since 2008 as investors tread water in anticipation of some sort of a resolution in Greece. Finance and technology stocks gained the most on the S&P 500 which closed 0.22% higher at 1,350. Earlier in Europe, bourses closed relatively flat with the DAX down 0.08% to 6,749 while the FTSE lost 0.24% to 5,876.

Commodities News


Commodity prices have eased slightly. The CRB index has closed 0.23 points lower at 314.77. After spiking to above $100.00 on the back of rising stockpiles, WTI crude has back to $99.00 this morning. Precious metals have lost ground with gold losing 0.71% to 1,736 while silver fell 0.58% to $34.00. Soft commodities were broadly lower while copper is up 0.76%.