COMMODITIES:STANDARD Poor's has lobbed a spanner into the works of the latest risk rally, after the rating agency warned that a debt rollover plan for Greece would place the country in selective default.
The euro turned tail on the news and European bourses – the FTSE 100 aside – were initially struggling to gain much traction.
Stocks had delivered a sharp rally last week – their best five-day bounce in 11 months – as two irritants received some soothing balm.
US manufacturing data came in better than expected and calmed some of the nerves about a slowdown in the world’s biggest economy and soft patches elsewhere.
Traders will be hoping that the crucial US non-farm payrolls report due on Friday will support this more optimistic thesis.
However, the euro zone sovereign debt crisis is again weighing on sentiment – though not so much that any serious selling is emerging.
S&P’s comments have reminded investors that a postponement of, and not a solution to Greece’s debt problems was reached last week.
The cost of insuring euro zone “peripheral” sovereign debt against default is moving higher and yield spreads relative to “haven” Bunds are widening.
There was no classic switch to “risk off” following the S&P news. The dollar index was up just 0.1 per cent at 74.33.
Copper was up 0.3 per cent to $4.31 a pound, near its highest level in more than two months, while Brent crude was down 0.4 per cent to $111.30 a barrel.
Precious metals got a boot, with gold up 0.5 per cent to $1,493 an ounce.
Star performer was Thailand’s benchmark SET index, which surged 4.7 per cent after the main opposition party, led by the sister of former prime minister Thaksin Shinawatra, won the country’s hotly contested elections, boosting hopes for the return of foreign investors.
Japan’s Nikkei 225 Stock Average added 1 per cent, at one point breaching 10,000 for the first time in two months, but settled at 9,965.
Car makers were stronger after the official Xinhua news agency said auto sales growth may recover in the second half of the year. – (Copyright The Financial Times Limited 2011)
US markets were closed for the Independence Day holiday
