The Greek election – the vote yesterday that grabbed the attention of the world’s financial markets – is expected to create volatility in the new trading week, in particular, for US stocks, according to analysts and investors.
Central banks from major economies are ready to take steps to calm financial markets should the outcome of the Greek elections create a market storm.
The rest of the week is not likely to be any quieter. The Federal Reserve is due to release a policy statement on Wednesday at the end of its two-day meeting, and the steady flow of sovereign debt warnings and downgrades is likely to continue.
In yet another sign of investor nervousness, the CBOE Volatility index , Wall Street’s fear gauge, was up for much of Friday, even as stocks rose, although the VIX finally closed lower.
Many investors have been trying to prepare for the worst.
“People have been hedging their positions aggressively over the past two weeks heading into this weekend,” said Alec Levine, a derivatives strategist at Newedge Group SA in New York.
Despite the fears, stocks ended lastweek on a positive note, marking a second straight week of gains. The benchmark Standard & Poor’s index is now up 6.8 per cent for 2012. Part of what has spurred optimism has been the hope that the Fed and other central banks would act to provide more economic stimulus. There has been continuing speculation over whether the Fed will engage in a third round of quantitative easing.