Greek Crisis Close to Climax

Markets have been hit by another bout of selling this morning as Europe prepares for what could be a crunch week in terms of the continent’s debt crisis. As reported at The Telegraph, Greece’s prime minister Lucas Papademos warned last night that his country faced “the spectre of bankruptcy and all the dire consequences that entails”, while the weekend also saw calls from German economy minister Philipp Rösler for stronger “monitoring” of the Greek government’s finances. Unsurprisingly, Greece’s Finance Minister has rejected this, describing it as undermining his nation’s “national identity and dignity”.

European Union heads of government are due to meet in Brussels later today for more discussions on a new fiscal compact for the eurozone. Such a treaty will not be signed by participants until March, but is expected to empower the European Court of Justice to “verify the transposition of the balanced budget rule at national level.” This comes on a day when credit default swaps on Portuguese government debt have hit a record high, while the yield on that country’s 10-year government bond has hit 14.4%.

As always in traders’ flights from anything with the word “euro” in the title, the US dollar has risen this morning, with the Dollar Index up 0.33% to 79.24 as of 11.45GMT. Gold and silver prices have fallen in-line with this dollar-buying “risk-off” trading, though the gold price is still just above $1,720/oz. Silver has of course endured a harsher correction than gold, having lost over 2% since the start of trading this morning. The silver price is currently at $33.16/oz.

Prices of crude oil, copper, corn and other important commodities have also fallen, though the escalation of violence around the Syrian capital of Damascus could portend graver problems for that country – which will likely add to the geopolitical factors supporting oil prices.
As well as the on going tension between the US and Iran, increasing violence in Nigeria could also have important ramifications for oil prices (Nigeria is the 14th largest producer of crude oil in the world). Other commodities will remain well-supported as long as oil prices remain firm.