Member Article

Risk assets tumble on Greek exit concerns

The lack of tangible good news fuelling yesterdays risk rally always left markets vulnerable, and indeed it took less than a day to give up its gains as equities fell heavily across Europe today. It came as former Greek Prime Minister, Lucas Papademos, stated that preparations for Greece leaving the eurozone are being considered. He later attempted to clarify his comments by suggesting that there are no preparations within Greece itself, however irrespective of his turnaround damage had already been done.

Highlight stresses in the system, €5 billion of German 2 year bonds (known as the Schatz) were auctioned today with a coupon of 0%. With secondary market 2 year yields around 0.06%, there was little point in offering investors a return on their money, with the auction sufficiently covered with an average yield of 0.07%, the lowest on record.

Domestic economic data didn’t help, with Retail sales falling 2.3% in April, and subsequently lower by 1.1% over the year, both well below forecasts. The bad news was blamed on heavy rainfall in April, reducing demand for summer clothing and high street spending. Sales of fuel fell 13.2% on the month, the most on record, following a wave of panic buying in March.

Markets fell throughout the day, the FTSE100 finishing down 2.5%, a loss of 137 points to 5266. Both major oil benchmarks were more than 2% lower, and gold fell almost 2.5% to $1539 at the time of writing. The euro was sold heavily, losing around 1% from already depressed levels to trade at $1.2563, sending it to a near 2 year low.

This was posted in Bdaily's Members' News section by James .