Fearing Greece Crisis
Investors danced in the market after Eurozone
granted extension and Fed delayed interest rate.
Source:
Bloomberg
Greece’s debt had been a
significant factor to euro currency dropping in value.
By: Brandon Peng
Date: February 20, 2015
Throughout this
week, the US market wobbled as Greece’s Prime Minister Alexis Tsipras and his
Finance Minister, Yanis Varoufakis, and the eurozone finance ministers
disagreed each other’s proposal to aid Greece’s debt repayment. In response, the
S&P 500 and the Dow Jones Industrial Average were volatile as their talk
progressed. After criticism from Germany officials doubting repayment from
Greece, their meeting ended off today with eurozone granting Greece the repayment
extension, but only for four months until June 2015.
This week had no
trading on Monday, but the Dow Jones Industrial Average ended it by climbing
154.67 points to 18,140; an all-time record with 0.86 percent gain. S&P 500
closed at 2110 after climbing 12.85, a 0.61 percent gain. And Nasdaq finished
at 4956 after climbing 31.27, a 0.63 percent gain.
Based on indexes, the
global market were in relief that Greece didn’t make a euro exit, a
discontinuation of Greece using euro as its national currency. If the agreement
was not made before Greece’s debt repayment date, after Feb. 28, then Greece’s
euro exit would have unsettled the global market. According to AP business
writer Ken Sweet’s interview with Christopher from Wells Fargo, Greece’s euro
exit could have disrupted the global market despite its small economy.
Other issues that
had an impact on trading this week, the Fed released its FOMC minutes but the
details on when interest rates will rise were not specific, and the Fed kept
replying back “patient”.
According to Lindsey M. Piegza, chief economist of Sterne Agee, the Fed was concerned about factors slowing the US economic recovery, such as “international developments” from Greece’s financial crisis. “Furthermore, some participants wanted to see further improvement in the labor market. Some participants believed that considerable labor market slack remained”, said Piegza.
In the upcoming week, Greek officials’ successful deal left them making economic reforms by Monday, for eurozone officials to judge. Meanwhile, the Bureau of Labor Statistic will update the consumer price index and jobless claims, and the Bureau of Economic Analysis will release the latest GDP (gross domestic product). Based on the results, they may affect the Fed’s next FOMC meeting on March 17-18, 2015.