Posted on July 06, 2015
Gold is moving slightly lower to begin the new trading as stock futures are being sold off, crude oil prices fall and the dollar index moves higher.
Clearly, the pressure being seen in equity index futures is a direct result from the weekend’s “no” vote in Greece. The Greek people voted against further austerity measures that would allow the country to continue receiving aid from the ECB. This latest development is another strong indication that Greece’s days as an EU member may be numbered.
Negotiations are ongoing, and there will reportedly be another meeting by EU leaders tomorrow to discuss the crisis.
While equity index futures were down sharply overnight, the market’s overall reaction to this latest turn of events is not that considerable. Perhaps there are remaining hopes that Greece and the EU/IMF can come to some sort of deal before it’s too late. The more time that passes without a deal, however, and the more realistic a Greek exit from the EU becomes, the more anxious investors and global markets may become.
Investors will also have other considerations outside of the ongoing Greek drama. Markets this week will see the latest readings on ISM Non-Manufacturing, PMI Services, International Trade, Consumer Credit, Weekly Jobless Claims and MBA Mortgage Applications.
In addition to this week’s data points, there will be several Fed officials giving talks. Wednesday may be the most important data day of the trading week, as the latest FOMC meeting minutes will be released. Investors are still looking for further clues on the Fed’s economic outlook and timing of rate hikes, and these minutes have the potential to be market-moving.
In other news, China took action over the weekend in order to prevent a stock market crash. The Chinese stock market has fallen by nearly a third in recent weeks, and the latest steps taken by Beijing are aggressive. These measures include the commitment of brokerages to buy billions worth of stock, a suspension of IPOs and the establishment of a new line of credit designed to support margin financing.
The recent moves by Beijing, and the bearish action seen in Chinese equities is obviously a source of concern. China is the world’s second largest economy and has seen strong economic growth for some time. Signs of cracking in Chinese markets could potentially lead to weakness elsewhere, and if the situation continues to get worse, other stock markets could potentially experience large sell-offs, as well.
While the technical picture for gold looks bearish, gold’s downside may potentially be limited as ongoing uncertainty over Greece and Chinese markets keeps some investors inclined to look for perceived safe-haven assets.