Precious metals rebounded strongly yesterday but only gold managed to maintain the strength in Asian session today. Renewed selling pressure in the euro and tensions on the Korean Peninsula have been supportive for price. The benchmark contract for gold soared to as high as 1197.3 before settling at 1194, up +1.52%, yesterday. The yellow metal remains firm in Asia today. Silver rose +1.98% to 18 yesterday. However, price retreated to 17.8 Tuesday amid fresh concerns about economic recovery. PGM also surged with platinum and palladium adding +2.22% and +3.21% respectively. However, most of the gains were erased as prices retreat today.
WTI crude oil edged higher but ended Monday only slightly at 70.21, up +0.24%. Price drops towards 69 in Asian session today. Brent crude closed +0.72% lower yesterday with price continues drifting low towards 70 in Asian session today.
The market was dominated by weakness in Spanish banking system and EU leaders' diverse opinions on revising the European Union treaty. The euro was badly hurt while US bourses tumbled.
After the Bank of Spain's takeover of Cordoba-based CajaSur, 4 Spanish savings banks plan to combine to form the nation's fifth-largest banking group with more than 135 billion euro in assets. The move deepened worries about the health of banking system in the country as the it's considered as the government's bailout effort help the 'weakest' of Spain's mutually owned banks that account for about half the country's loans.
In a report, the IMF said Spain's banking sector 'remains under pressure' as 'Consolidation needs to accelerate to reduce overcapacity and produce more robust institutions' has been 'too slow'. Concerning the economy, Spain is faces severe challenges including 'a dysfunctional labor market, the deflating property bubble, a large fiscal deficit, heavy private sector and external indebtedness, anemic productivity growth, weak competitiveness, and a banking sector with pockets of weakness'. The IMF advised the country to have 'far-reaching and comprehensive reforms'.
The euro tumbled further as European Commission President Jose Manuel Barroso commented Germany's aim to modify the European Union treaty as 'naive'. At an interview with a German newspaper, Barroso said that 'we will not propose treaty modifications even though we are open to good ideas…It would also be naive to think one can reform the treaty only in areas Germany considers important'. The comments were in response to German Chancellor Angela Merkel's urge for a modification of the treaty.
Catching up with US' fall, Asian stock market tumble with the MSCI Asia Pacific Index sliding -2.3% to a 10-month low. Major regional indices decline with Japan's Nikkei 225 Stock Average, Australia's S&P/ASX 200 Index and South Korea's Kospi losing -3%, -25 and -4% respectively. Apart from Eurozone's sovereign crisis woes, the market is hurt as Korean tensions intensified.
Yonhap News Agency reported that North Korean leader Kim Jong Il last week ordered its military to get ready for combat after the country was accused of firing a torpedo to split apart the 1200-ton Cheonan. Yesterday, South Korea announced that it will push for UN's censure against North Korea for the torpedoing a naval ship, which killed 46 sailors on March 26. At the same time, the news agency said South Korea plans to define North Korea as its 'main enemy'. The tension on the Korean Peninsula adds uncertainty to the market.
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