Central banks to a Greek rescue
by Peter Switzer
Of course, the Yanks have been hanging out hoping Ben Bernanke would come out and say QE3 was on but I think the Fed boss really wants to hold this trump card until the USA really needs it. And I hope he doesn’t have to play it.
The story in simple terms is that if the left-wing Syriza party wins a run on Sunday, Greek banks could unsettle global financial markets as the fear of contagion in places like Spain and Italy could ensue. So central banks are ready.
On my Switzer program on the Sky News Business Channel, George Boubouras, the UBS investment hotshot, who carries a Greek passport, thinks his countrymen will reject the left-wing option but he admits he could be wrong. The Greeks have banned polls in the past two weeks ahead of the election.
Anyway, US traders liked what they heard about central banks being ready to spin out more money supply and so the Dow was up 155.53 points or 1.24 per cent to 12,651.91, while the S&P 500 index was up 14.22 points or 1.08 per cent to 1329.1.
The Greek election is a big deal with an emergency G7 meeting in Mexico a possibility, Reuters reports. And it comes as downgrades for France and Spain have pushed bond yields up but the latter could be reversed next week if the Greek election results reduce fear and loathing on financial markets.
Contagion fears are rising and so we need a circuit breaker to help confidence. The idea of central banks acting together is helping but we need to see the Greeks add solidity to the euro and then EU leaders have to step up to convince markets that the euro is not on death row.
To show what effect the promise of central bank coordinated action can have, the Oz dollar is a tick over parity with the greenback this morning.
Who would have thought a Greek election could hold the attention of world financial markets? Well, it’s the main game this weekend and let’s hope good sense and sanity prevails, if only for our superannuation balances. Let’s not even think about how a contagion catastrophe could affect the global economy, jobs and the profitability of businesses. Don’t go there!
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Published on: Friday, June 15, 2012
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