The Greek Bond Bomb Keeps Ticking

The risk premiums on Greek government debt continued the ascension, and ended at a record high levels. Friday. If this trend continues, the Greek state will soon not be able to borrow money in the private market, and the danger of a public bankruptcy will be imminent.

“As long as the Greek debt bomb is ticking, the financial markets will remain nervous.”

Orion Securities

Greece seems to be caught in a self-reinforcing negative spiral, and it is difficult to see any quick and easy way out of the mess, analysts at Orion Securities writes to their clients Monday, and says that the hope is that other EU countries like Germany will come to aid, but this is far from certain because such a rescue will be most unpopular with German voters.

The leading Western stock exchanges, fell 1.2% last week, pressured by concerns about the sustainability of the global economic upswing and the situation in Greece.

Oslo Stock Exchange however, managed a lift of 1.6%.

The rise was led Marine Harvest, TGS and RCL which rose respectively 14%, 8% and 7%.

Among shares who pulled in the opposite direction, was Statoil and Golden Ocean, which fell 2% and 4%.

In the foreign exchange market the main focus was on Greece, which helped sending the dollar up 2% against the euro.

In the commodity markets, there was an extensive downturn. Aluminum and copper fell 5 – 6%, while Brent Oil weakened by over a dollar per barrel.

In the freight market bulk rates fell 11%, to its lowest level in three months, and in the tanker market, the arrows also pointed down.

In the bond market the ascension in Greek state interest continued, while German and U.S. government interest rates were slightly down.

Is The Stock Market Correction Over?

“This can hardly be said with certainty, but we do think the most of the decline is over. However, we recommend to follow closely developments in Greece,” analysts at Orion Securities underline.

“As long as the financial tensions continue to rise, it pays to be probably careful with risk assets in general and resources stocks in particular,” they conclude.

So, why is Greece important?

“Because the Greek problems helped to send the dollar up against the euro, and a strong U.S. dollar, in turn, undermines the commodity market. A strong dollar is also negative for Wall Street because competitiveness of American business is being reduced.”

What’s next for Greece?

“The country seems to be caught in a self-reinforcing negative spiral, and it is difficult to see any quick and easy way out of the mess. The hope is that other EU countries like Germany will come to Greece aid, but this is far from certain that such a rescue will be most unpopular with German voters.”

What happens if Greece is forced to declare a debt moratorium?

“Basically not much since Greece is a small and insignificant economy. The main risk is however, that such an event sets in motion a domino effect that affects new and far more important countries.”

“Therefore, a public bust in Greece will be bad news,” Orion Securities warns.

European Markets Afternoon Snapshots:

Reblog this post [with Zemanta]

0 thoughts on “The Greek Bond Bomb Keeps Ticking

  1. Pingback: “The Monster” Signals U.S. Labor Recovery « Econotwist's Blog

  2. Pingback: “The Monster” Signals U.S. Labor Recovery « Econotwist's Blog

  3. Pingback: The Northern Lights (And Dark) « Econotwist's Blog

  4. Pingback: The Northern Lights (And Dark) « Econotwist's Blog

  5. Pingback: Global Markets: “The Fear Is Still Out There” « Econotwist's Blog

  6. Pingback: Global Markets: “The Fear Is Still Out There” « Econotwist's Blog

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s