Libyan FM Defects as Gold, Stocks and Oil Rise

Markets have been exceedingly resilient against the disappointing releases and difficult events of the past weeks, and as such releases become rarer, traders are displaying a great deal of enthusiasm about purchasing risk. Today is a bullish day although there is nothing particularly bright in the  political or financial news flow.

In Japan, "radioactive iodine-131 at a concentration of 4,385 times the maximum level permitted under law has been detected in seawater" near the Fukushima Daiichi nuclear plant today, according to the Kyodo news agency. The government is continuing to deny that the leaks constitute an immediate health hazard, but fears about the so-called recriticality are being voiced both in and outside Japan as the crisis drags on. 

Elevated radiation levels have been detected as far away as Britan and Switzerland, and some radioactivity has been detected in milk in the U.S. as well, although these levels are extremely low so far and do not pose any risk to people, according to official reports. Markets appear to have shrugged off the risk of wider contamination and seem to have settled for the viewpoint that the greatest economic and political impact of the leaks will be felt in Japan itself, with negligible results for global growth.

In Libya, Colonel Gaddafi`s foreign minister, and former intelligence chief, Moussa Koussa has defected to the U.K. after taking a flight through the neighboring Tunisia. There are signs that the Libyan leader`s regime is cracking from the inside, but the military situation remains inconclusive, so markets did not react strongly to the news. 

In the U.S., some focus is on the release of the list of banks that borrowed from the discount window during 2008-2009 - the most difficult days of the global financial crisis. The Fed will be releasing the identities of future borrowers after the passage of two years, in line with the Dodd-Franks Bill on banking regulation passed last year. If anything, this should make Fed officials a bit more cautious while bailing out financial firms, since from now on they may be accused of corruption and collusion of interest once the details of their past actions are made public. However, we are skeptical that the impact will be as strong as many would like.

Markets outside of the U.K. and the Eurozone were optimistic today, in anticipation of a favorable unemployment report. Most Asian markets were higher, as were gold and oil, and EUR USD appreciated while USD JPY fell. In Europe, focus remains on the uncertainties surrounding the Eurozone sovereign debt issues, the resolution of which is likely to stretch years into the future. Some concern is caused also by the ambigous position of the Irish government vis-a-vis their creditors. How much private lenders of the government will have to swallow in losses is an issue that is still haunting the Eurozone, suppressing the Euro currency even as the rest of the world retains a rather strong sentiment towards risk.