Equity Markets Weaken as Greece Downgrades Spooks Traders
U.S. stock markets are expected to open lower based on weaker markets overnight. Traders are taking risky positions off the table in response to another debt rating downgrade of Greece. Traders now fear that the debt crisis could worsen in the Euro Zone and perhaps spread to U.S. banks. This news is triggering a rally in the Dollar and subsequent weakness in the U.S. equity markets. Today could be an ugly day in U.S. stock markets if enough traders decide to book profits before the end of the year rather than risk a substantial correction.
March Treasury Bonds are trading higher due to demand for a safe haven investment. Yesterday’s Fed statement signaled that rates were going to move higher. This pressured the Treasuries, particularly the long-end of the yield curve. The overnight downgrade of Greece debt and the sell-off in equity markets has sent traders to the safety of the Treasuries.
The stronger Dollar is pressuring February Gold. Yesterday gold rallied while the Dollar traded flat. This perhaps was a sign that investors were beginning to focus on inflation or central banks were buying again. The overnight weakness suggests, however, that the Dollar still wields a strong influence on the direction of gold.
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