Global market rebounds Monday as governments all over the world strive to quell debt crisis. In order to arrest euro's slump, EU finance ministers have agreed on an emergency plan worth 500B euro to prevent sovereign crisis in Greece from spreading to other countries. The 16-nation Eurozone will make 440B euro available while the remaining 60B euro will come from EU's emergency funding. News said that the IMF will inject 250B euro in the rescue. Total funding of 750B euro is in addition of the EU-IMF agreement to provide 110B euro loans to help Greece meet its debt obligation over the next 3 years. Both EU leaders and the IMF have approved the 110B-euro plan over the weekend.
After remaining silent during the ECB meeting last week, the central bank said it will intervene in government and private bond markets and pledged to defend the euro whatever it takes. According to a statement released today, the Governing Council decided to 'conduct interventions in the euro area public and private debt securities markets to ensure depth and liquidity in those market segments which are dysfunctional'. While the ECB is not allowed to buy government bonds directly, it can do so by purchasing second-hand from banks. There's no such restriction for the FED and the BOE.
A joint action by the ECB, FED, BOE, BOJ, SNB and BOC is also announced. The central banks re-establish temporary U.S. dollar liquidity swap facilities which are designed to help 'improve liquidity conditions in USD funding markets and to prevent the spread of strains to other markets and other financial centers'.
The euro rises above 1.29 against USD for the first time in 3 days. Stock markets advance in Asian session with the MSCI Asia Pacific Index rallying +1.2%. In Japan, the Nikkei 225 stcok Average soars +1.6% while Hong Kong's Hang Seng Index gains +1.3%. Oil prices also rebound with WTI and Brent crude oil prices jumping more than $1 to 76.8 and 80, respectively.
Comments from OPEC leaders also support oil prices. Saudi Arabia's Oil Minister Ali al-Naimi said oil demand is very good and is going to increase this year while Algeria's Chakib Khelil said demand is helped by consumption growth in 'China, India and the Middle East, as those countries 'are not affected by what's happening in Greece'. The Algerian oil ministers added that they are optimistic Greek crisis will be resolved soon with the help of the EU and then see oil prices go back to their level of 80-85 dollar per barrel.
Gold retreats as recovery in risk appetite reduces safe-haven demand. The benchmark contract slides to 1199 from Friday's close at 1210.4. Silver, which jumped +5.3% last Friday on 'poor man's gold' appeal, also edges low to 18.4 in Asian session.
As investors lured for PGM's strong industrial demand, prices rebound as global governments commit to contain sovereign crisis which is expected to slow growth. Platinum rises for a second day to 1685 while palladium soars to 525 after dropping to 510.2 last Friday.
Commitments of Traders
Crude Oil: Net speculative long positions edged higher to 109.9K in the week ended May 4. During the week, crude oil price rallied to a 19-month high at 87.15 and then reversed amid contagion fears of Greek sovereign risk. We expect a sharp drop in net longs in the coming week as oil price slumped to as low as 74.51.
Natural Gas: Net speculative short positions returned to historical high level amid supply concerns. The market was disappointed as US Energy Department's revision on gas storage using the new methodology was much less than expected
Gold: Net speculative long positions jumped to 230.5K, the highest level since December 2009, last week as the market sought safe-haven assets. We expect to see further rise in net longs in the coming week as Greek sovereign crisis woes escalated and pushed more capital to gold
Silver: Net speculative long positions slid to 36.7K, in tandem with price decline during the week. As market's attention was in gold, silver, which has great industrial applications, was ignored
Platinum: Net speculative long positions fell slightly to 23.5K together with price correction. Liquidation of previous long positions was a major reason.