Greece Crisis once again dominated global economy – Global shares, commodities tumble

The European markets are expected to follow their Asian counterparts and financial analysts and speculators predicting that the main European Markets such as FTSE, GDAXI, and FCHI may open lower with 0.3 percent and the Europe Stock Futures up by 0.3 percent.

The Asia-Pacific shares of MSCI’s broadest index outside Japan MIAPJ0000PUS pushed back to as low as 1.1% which a four month low and then shedding some losses  to 0.4%. The worst performance came from commodities that dragged down the Australian shares AXJO. On the other hand, a sturdy yen and exporters with high exposure to Europe were responsible for Japan’s Nikkei average N255 tumbling down as much as 1.5%.

The U.S Bench mark S&P or Standard & Poor’s 500 indexes SPX fell below the key support line at 1,340 and bank shares took a severe beating because of J.P. Morgan Chase & Co. suffering a trading loss which is estimated to reach $3 billion or more. The euro dashed to a four month low of $1.2814 and in the same way the Australian dollar hit a low of $0.9945.

Currencies that are usually regarded as a safe bet for their stability have stayed well in the form of U.S dollar and the yen, with the dollar index .DXY gaining an up momentum of a four month peak of 80.739.

Absence of Government in Greece

Even after 8 days of election, Greece is not able to form a government. Another bout of elections seems to be on horizon with a strong political opposition to international bail out and austerity measures. It is unlikely that anti-bail out leftists will win even if new elections are held. European leaders are quite firm on their posture that they will cut off the funding unless and until the Greece government fulfills its bailout commitments.

Any cut off in the bailout funding will lead to a vicious cycle of disorder pertaining to restructuring efforts by other indebted euro-zone countries that agreed to harsh fiscal reforms in exchange for rescue funds. Tuesday’s figure on China’s Foreign Direct Investment inflows showed a dip of 2.4 percent in January-April this year when compared with last year. This drop is the longest one even since the emergence of global financial crisis.

Escape to Safer Places

The Asian credit markets buckled under the pressure of broad risk aversion leading to widening the spread on the iTraxx Asia ex-Japan investment grade index by 7 basis points. However, the Japanese government bonds rebounded up to the highest ever since the late 2010. There is an escape from the riskier assets, together with a firm dollar that caused the Thomson Reuters-Jefferies CRB Index down to 1.2 percent below to settle down below 290 points on Monday.

Losses on oil front continued with U.S. crude down by 0.6% to $94.24 a barrel and Brent off 0.5% at $111.03. At the same time copper fell nearly to one percent to a low of $7,763.50. Spot gold touched four and half month low below $1,550 an ounce due to investors going on for cash in exchange of bullion. However, physical markets were bustling with activity due to lower prices of bullion.

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