Courtesy of John Nyaradi
Global financial markets edged closer to the breaking point today as Greek debt problems flared hot on the front burner and debate fired up on Capitol Hill over President Obama’s new jobs plan.
Global stock markets (except for a last minute save in the United States) fell again today as the spectre of a Greek default kept investors on edge.
Europe and Asia declined sharply on news that Greece default risk now stands at 98%, in spite of President Papandreou’s promises of even greater austerity.
The financial markets don’t see a happy outcome to the Grecian drama as yield on the Greek one year bond exceeded 100% and Portugal, Italy and France all saw pricing on their Credit Default Swaps reach record levels.
Rumors of a downgrade of French banks this week by ratings agency, Moody’s, added to the gloom and certainly the German banks can’t feel comfortable with $14 Billion in Greek bonds and 53% of their population opposing more aid to the ailing country.
The Euro (FXE) didn’t like the news as it plumbed new six month lows.
On the home front, informal debate on the President’s job plan began with President Obama calling on reduced tax breaks on high earners and oil companies to help pay for the plan while Republican Congressman Eric Cantor says no new taxes (haven’t we heard all of this before.)
The problem here is that a nearly $500 Billion jobs bill is on the table while the Congressional “super committee” is tasked with coming up with $1.2 Trillion in cuts by November 23rd or face mandatory reductions down the road.
The arithmetic here just doesn’t add up, and once again we find ourselves facing a ticking clock of leadership gridlock.
U.S. markets rallied in the last half hour, adding roughly 2% in the last thirty minutes of trade on news or rumor that China was going to buy Italian bonds and help out the beleaguered “boot.”
U.S. Stock Market Roundup:
DJIA: (DIA) +69; +0.6%
NASDAQ: (QQQ) +27; +1.1%
S&P 500: (SPY) +8; +0.7%
Russell 2000 (IWM +5.8; +0.9%
Finally news out of Bank of America was glum with estimated layoffs of 30,000 while a Bloomberg article discussed one of their top analysts forecasting a potential drop of 21% in the S&P 500 based on technical indicators
Bottom line: Never a dull moment as the volatility continues. Greece will continue jerking global markets around. At home the big economic news starts coming Wednesday. Wall Street Sector Selector remains in the defensive mode, expecting lower prices ahead.
Click here to learn more about John’s book and for a free membership to Wall Street Sector Selector
