Market update - 13.12.2011
Global markets drop
on EURO concern
After a couple of days of digesting the result of end of last week’s EU summit meeting, global markets are back in deep red. Instead of the summit leading to a relief Christmas rally, dark skies are back on the horizon. The sovereign debt crisis, a strong need for recapitalization of major European banks, a looming recession and the future of the Euro are back on the top of the agenda.
The EURO continues to be under strong pressure and reached a 10-week low versus dollar at 1.3198. EURO is also loosing ground versus yen, JPY dipping to 102,60. The markets are expecting that S&P rating agency already this week is going to follow up it’s threat to downgrade all countries within the EURO-zone.
Eight Spanish banks were yesterday placed under review for a possible downgrade by another rating agency, Moody’s Investors Services, adding strongly to the question marks and uncertainties in the whole banking sector.
Support at the 1.3150 mark for Euro/USD is vital. A clear breach of the mark can technically open the Euros downside to 1.2860 reached in January 2011. As long as the European Central Bank gives up it’s reluctance to purchase more euro-zone sovereign debt, the Euro seemed in for further dips.
In many financial circles there are increased concern about the austerity course chosen by European leaders. Strict austerity measures can according to many economists only lead to a repetition of similar mistakes European leaders made between the two world wars leading to mass unemployment and economic recession.
Markets all over the world are strongly down along with deep plunges in the gold and precious metal prices. Gold trading at 1651 with analysts forecasting steeper falls.