Europe
The reopening of Greek banks as well as the country making its debt repayment to the European Central bank and IMF on Monday helped European markets to modest gains on Monday.
The reopening of Greek banks with a new withdrawal limit of €420 per week is largely symbolic but is the first step needed to bring confidence back to depositors. Greece will need to see emergency lending increase well above the current ceiling set by the ECB to account for likely continued depositor withdrawals if full services were to resume.
The FTSE 100 was mostly flat with resource stocks including the gold-miner Randgold Resources (LONDON:RRS) and Fresnillo (LONDON:FRES) leading the declines after the flash crash in Gold prices overnight.
Sports Direct (LONDON:SPD) was the main benchmark’s biggest gainer after a broker upgrade that built on well-received earnings reported on Thursday.
A strong performance from British Land (LONDON:BLND) since May helped the company confirm its dividend and prompted a good showing from other UK property stocks.
Shares of ARM Holdings (LONDON:ARM) were up ahead of the earnings released on Tuesday by its best customer, Apple (NASDAQ:AAPL).
US
US markets opened higher helped by strong earnings performance from investment bank Morgan Stanley (NYSE:MS) and defence contractor Halliburton (NYSE:HAL).
Shares of Morgan Stanley (NYSE:MS) jumped 2% at the open after the investment bank beat profit and revenue expectations, although profits were still down on the year. The rise in bond trading income was a surprise given the declines seen at rival banks. The bank’s wealth management business also saw annual growth, in line with CEO James Gorman’s plan to reduce reliance on FICC trading.
Shares of newly-listed PayPal (NASDAQ:PYPL) were seeing some strong early demand on the first day after having being spun out of eBay.
FX
The US Dollar saw mixed results amidst a lack of market-moving economic data on Monday with the New Zealand dollar firmer ahead of the RBNZ rate decision but another drop in oil prices hurt the Norwegian krone.
Commodities
Gold flash crashed by over 4% in a matter of minutes during early trading in Asia on Monday, with volume for those few minutes a fifth of the average daily turnover for Shanghai exchange. The price quickly recovered over half the losses, leaving the commodity well down on where it was a week ago.
The Chinese government’s release of its official gold reserves seems to have been the final nail in the coffin for gold. Commodities in general have been under pressure this year due to a faltering Chinese economy and strength of the US dollar.
China’s gold reserves increased by 60% since 2009 but that is much lower than many had expected, with some predictions of an over 300% increase. These gold reserves are not in keeping with an attempt by the Chinese government to make the yuan a gold-backed currency, capable of rivalling the US dollar as a world reserve currency. China is now the fifth largest holder of gold in the world, ahead of Russia but still well behind the US and the other top three holders; France, Germany and Italy.
China released its reserve stats for gold in order to increase the chance that the IMF will include the yuan as part of a basket of currencies that make up its own currency, the SDR. There is scepticism over all officially published statistics from China, and its gold reserves needn’t be an exception.
China’s aim for buying gold is not speculation; it forms part of a strategy to compete as a world super power. Unlike gold investors, China would actually benefit from falling gold prices since it would cost them less to accumulate over time. The PBOC may have released a number for its gold reserves that it believes is large enough to justify it being part of the SDR, but small enough to prevent speculators sending prices higher.
Even before today’s and last week’s declines, gold was looking weak; it barely budged as a safe haven during the Greek crisis and China’s stock market rout. Gold has been under duress from US a dollar that is being driven higher due to speculation of an interest rate hike by the Federal Reserve.
While the price could consolidate in the short term, Monday’s volatility will have shaken out even some of the most ardent gold bugs, making further downside to prices the path of least resistance.
The stronger dollar environment and the prospect of more OPEC oil being exported from Iran continues to weigh on oil prices which fell on Monday.
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.