Wall Street Tumbles Along With Europe and Asia

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Er zijn twee maten, een Europese en een Amerikaanse.
In de USA wordt gemiddeld elke 6 dagen een bank onder curatele gesteld
of geforceerd overgenomen. Als dit in de EU gebeurt is het een teken van
zwakte (van economie, euro, whatever ;)

Groet / Cees

May 25, 2010
Wall Street Tumbles Along With Europe and Asia
http://www.nytimes.com/2010/05/26/business/26markets.html
By CHRISTINE HAUSER and DAVID JOLLY

Shares on Wall Street and in Europe skidded Tuesday and the euro resumed
its fall as concerns about public sector finances in Europe escalated.

At mid-day, the Dow Jones industrial average declined 142.31points or
1.41 percent; the Standard & Poor’s 500-stock index declined 1.4
percent; and the Nasdaq dropped 1.5 percent.

In Europe, the Euro Stoxx 50 index of euro-zone blue chips fell 3.4
percent, led lower by the Spanish bank, Santander, which fell 4.8
percent. The FTSE 100 index in London fell 2.2 percent. Most major
markets across Europe were down at least 2 percent, with the main
Spanish and Italian indexes down about 4 percent at one point.

As investors had feared for months, the uncertainty broadened Tuesday
from Greece’s fiscal troubles to those in other European countries and
exacerbated concerns about the health of the global economy.

“If there was a doubt about it, there isn’t any more,” said Marc
Chandler, the global head of currency strategy for Brown Brothers
Harriman & Company.

“The European debt crisis is not simply a Greek phenomenon,” he said in
a research note.

Besides Spain, the debt crisis has started to hit home in Portugal,
which has also taken steps to make cuts, and Italy, where the government
was also announcing spending cuts.

“We’re seeing the same problems with Europe,” said Philippe Gijsels,
head of research at BNP Paribas Fortis Global Markets in Brussels,
“except now attention is focused more on Spain,” where the central bank
took over a failing lender, CajaSur, over the weekend and four smaller
banks agreed to merge.

The International Monetary Fund said in a statement that in addition to
the austerity measures already passed, Spain needed to consolidate its
banking sector and overhaul its labor sector.

Languishing worries about Europe were joined Tuesday by renewed tensions
on the Korean peninsula.

President Lee Myung-bak of South Korea said Tuesday that he would
redesignate North Korea as his country’s archenemy, as the South Korean
and American militaries announced plans for major naval exercises.

On Monday, South Korea cut off trade with North Korea, denied North
Korean merchant ships use of its sea lanes and called on the United
Nations to censure the North for what it called the deliberate sinking
of one of its warships by a North Korean submarine.

Asian indexes closed lower as a result, with the Kospi index in Seoul
tumbling 2.8 percent. The Tokyo benchmark Nikkei 225 stock average fell
3.1 percent to its lowest close since Nov. 30. In Hong Kong, the Hang
Seng index fell 3.5 percent.

Still, Adrian Cronje, chief investment officer of Balentine, said that
problems on the Korean peninsula aside, the fiscal troubles in Europe
were overriding confidence.

“The bottom line is risk aversion has gone up,” he said.

“You can try to bring out the bazooka to solve what is going on in
Greece, but don’t ignore what is happening elsewhere” in Europe.

Mr. Cronje said markets needed more than the nearly $1 trillion European
support package to restore confidence. Instead, he said, investors are
looking for a credible plan that indicated public finances in Europe
could be kept at a sustainable level. In addition, there was greater
scrutiny over how the European economic troubles were affecting any
recovery in the United States and Asia.

“What is happening now is people are starting to wake up to the fact
that this stands a chance of derailing the robust economy,” Mr. Cronje said.

The euro continued to weaken, on Tuesday, tfalling to $1.2229 from
$1.2371 late Monday. The British pound fell to $1.4332 from $1.4425.

With the volatility in euro trade still high, investors were trying to
gauge the potential impact that disorderly markets would have on the
economy.

Mr. Chandler, the currency strategist, said the euro’s decline has added
to concerns about what that would mean for American companies’ exports,
profits and the recovery. “I think we have probably seen the worst of it
for the day,” he said of the euro. “I think that a lot of people are
already short euros. The bottom line is that people know whatever is
going on now can’t be sustained. People are nervous about officials
having some kind of strong response so they might be tempering sentiment
and waiting for a bounce of any sort.”

Domestic economic indicators were being watched closely for any sign
that events in the Euro-zone were having an impact on the United States,
said James O’Sullivan, chief economist for MF Global.

The Standard & Poor’s/Case-Shiller 20-city home price index released
Tuesday showed a 0.5 percent drop in March compared to February, a sign
that the housing market was weakening despite low mortgage rates and
government tax credits.

But more important than the March housing statistics were more current
figures showing consumer confidence rose this month, Mr. Sullivan said,

The Conference Board index of consumer confidence rose to 63.3 in May,
from 57.7 in April, according to a report released Tuesday.

“The decent rise in U.S. consumer confidence in May suggests that the
turmoil in financial markets and lower house prices have yet to have an
impact on the real economy,” said Paul Dales, United States economist
for Capital Economics.

European policymakers have tried to stave off the broader spread of the
sovereign debt crisis with a bond-buying program by the European Central
Bank in addition to the $1 trillion in financial aid. That official
rescue has largely stopped the hemorrhaging in euro-zone government bonds.

But interbank lending is coming under increasing pressure. Conditions in
the credit markets deteriorated further on Tuesday, with the London
interbank offered rate, or Libor, for three-month dollar loans rising
for a 12th consecutive day, to 0.53625 percent from 0.50969 percent
Monday. It was the Libor’s highest rate since late July 2009.

The cost of insuring European blue chip corporate debt against default
rose 11 percent, according to the Markit iTraxx Europe index.

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