Sentiment Damped Modestly amid Uncertainties in Slovakian Vote and Greek Funding

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The focus was on the Eurozone again with both Slovakian ratification on EFSF and 6th tranche of funding for Greece delayed. Financial markets were pressured initially because of the news but then improved as investors were confident that both will issues will be resolved. In the commodity sector, the front-month contract for WTI crude oil fluctuated between 83.97 and 86.64, before ending the day at 85.81, up +0.47%, while the equivalent Brent crude contract plunged to as low as 107.45 in European session before rebounding to 111.24 and settling at 110.73, up +1.63%. Gold eased a tad as the US dollar changed little. The benchmark Comex contract slipped -0.59% during the day.

While the consensus view is that Slovakia will eventually ratify the new EFSF bill, probably in a second vote, the approval is no guaranteed. The country failed to pass the plan with 55 lawmakers voting for the measure, 9 against it and 60 abstaining. The expanded EFSF plan will increase the size of the facility from 440B euro to 780B euro and Slovakia will be required to contribute roughly 10B euro in debt guarantees. It's reported that the junior ruling coalition Freedom and Solidarity party, one of the four parties in the coalition, has refused to participate in the vote, making the final result hardly a majority. Slovakia is the only country in the 17-nation Eurozone that has not yet ratified the beefed-up plan agreed in July. The issue has generated questions about the formation of the bloc as it seemed to have given too much power to small and new members in affecting the European financial stability framework.

In Greece, the EU/ECB/IMF troika once again delayed the 6th installment of the bailout funding worth of 8B euro. The statement released after the review said that the next tranche of 8B euro will become available, 'most likely, in early November', once the 5th reviewed is concluded. The troika stressed that 'the success of the program continues to depend on mobilizing adequate financing from private sector involvement ( PSI ) and the official sector'. Another matter of concern was the haircut issue after Luxembourg's Jean-Claude Juncker was quoted of having said that more than 60% of Greece's debt may need to be restructured. Yet, the Eurogroup Chairman later clarified that he meant that haircuts could exceed the 21% already agreed in July.

On the macro front, the UK's claimant count probably increased to 24K in September from 20.3K a month ago while the Claimant count rate rose to 5.0% from 4.95. The ILO unemployment might have climbed to 8.0% in the 3 months to August, up from 7.9% in July. The FOMC minutes will be released in the US session.

 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities

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