With summer doldrums well and
truly upon us markets have been drifting lower on low volume and trying to
hold their May lows. Most metals and certainly gold have performed better and
seem to have bottoms in place.
After such a long bear run
it's not likely we will get a huge bounce during the summer when so many are
trying not to think about the market. Not every stock is falling however. As
we note in the updates there are three companies on the HRA list that have been
getting a lot more attention from traders and several others that are getting
traction based on results to come. That isn't much but it is an improvement.
We don't know yet how "real" any of these discoveries are, but new
finds are the shortest route to renewed investor interest in the sector.
Major markets have not been
cooperating thanks to debt issues that won't go away soon. There are plenty
of headwinds still but commodity prices, though lower, are all at levels that
make them hard to pin the blame on for weak markets.
This is still about sentiment.
It's not likely most economies will generate strong enough numbers to rock
the markets. If things calm enough new discoveries may be able to help the
juniors themselves and we're pinning our hopes on that for the time being.
It's been an eventful month in
Europe, and we don't just mean the Euro 2012 Cup (Congratulations to Spain on
a great win). The EU held its 19th summit since Greece fessed up to it's debt
problems. There were no expectations it would produce anything momentous
since the 18 before it hadn't. The markets were taken by surprise when, for
once, the European political class managed to do something almost decisive.
This meeting followed the
latest US Fed meeting where the decision was made to extend and somewhat
expand "Operation Twist" and keep US long term yields low. Not that
the market needs much help in that regard. Traders have been so spooked and
piling into the US debt market in such numbers that rates are already
miniscule.
That central bank meeting
followed two other events that went the way the markets wanted but produced
no lift whatsoever. First up was an agreement by EU members to lend Spain up
to 100 billion to help shore up its banking sector. EU creditor nations
managed to prove one again that they didn't get it. The way the announcement
was handled and the strings attached to the loans meant the markets quickly
gave the deal a thumb's down.
Things were salvaged to some
extent by good news on the Greek election. Pro bailout parties prevailed this
time, though the margin of victory was thin. There is now a three party
coalition in Athens though almost all of the cabinet comes from the leading
New Democracy party.
Although the pro bailout
forces won, their fear of losing to charismatic leftists meant they were also
selling the idea the debt deal would be rewritten. Greece has indicated it
wants a two year extension on the deadlines to reduce its deficit to 3% of
GDP. Creditors are not pleased but the new timeline is probably actually a
best case scenario with a collapsing economy. Creditors tsk tsking won't
change that.
Markets reacted badly to all
the news above. It's probably for the best that it did. Europe is an amalgam
of fiscally prudent and fiscally idiotic states. Until Europe reduces its
debt load to something manageable---if that ever happens---the opinions of
fiscally strong countries are the only ones that really matter. Those
governments are the ones that can afford to undertake major new initiatives
or underwrite joint debt. It's been clear since the crisis erupted that
creditor countries will only act when the market forces them to.
