The uncertainty continues (ISFM) (08-05-2012)

Volatility continued to be the key element in world stock markets today, even as initial shock from election results in Europe faded; concern persists, however as to whether Greece will be able to form a government capable of fixing its financial mess.

Despite the volatility, earlier today, most Asia stock markets ended marginally into Greek territory, although any recovery remained under pressure due to the political uncertainty in Greece.  Chinese shares ended lower. The uncertainty kept the euro relatively weak against the yen, and the U.S. dollar traded just below the ¥80 level in afternoon Tuesday trading, helping technology and car exporters’ stocks rebound a little from Monday’s battering.

Benchmark oil for June delivery was down $1.16 cents to $96.78 a barrel in electronic trading on the New York Mercantile Exchange. In currencies, the euro fell to $1.3010 from $1.3050 late Monday in New York. The dollar fell to 79.85 yen from 79.94 yen.

The political deadlock in Greece fuels fears of further economic turmoil in the euro zone, and the region’s markets were down. Banks were leading losses, and were closely followed by energy companies in the wake of the deep falls in oil prices in recent days. With the victory of Francois Hollande in France, investors are now worried that a changing of the guard in Europe's leadership could jeopardize its plans for fighting a two-year debt crisis.

The anti-austerity verdict from European voters will likely force leaders to come up with more acceptable solutions to the debt crisis. The deep cuts in government spending have already worsened the situation in many countries, leading them into deeper economic distress and increasing already high unemployment.

On Wall Street, U.S. stock-index futures were retreating shortly before the open, as worries mounted over the inability of Greek party leaders to form a government after inconclusive elections.

Source: ISFM