Fears of Greek contagion sweep global markets

[Ghost Dog]

Source: Reuters

ATHENS/BERLIN (Reuters) – ... German Chancellor Angela Merkel said Europe's fate was at stake. France declared the euro was under speculative attack but said such a move would fail. And the Greek government vowed not to retreat a single step despite violence on the streets of Athens.

...

Japan's Nikkei average fell more than 3 percent to its lowest level in nearly two months as the market caught up with the global selloff following a three-day holiday this week. Asian shares outside Japan as measured by the Morgan Stanley Composite Index index dropped 2 percent and the world stock index has now given up all of its gains so far in 2010 following the steep selloff this week.

"The focus stays on the euro as the contagion trade persists," said JP Morgan in a morning note. "Today's ECB meeting has grown immensely in importance as the redeployment of some form of credit crisis tools seems increasingly possible."

...

Despite official denials, many economists are convinced Greece will have to restructure its debt, making private investors take a share of the pain.



Read more: http://news.yahoo.com/s/nm/20100506/bs_nm/us_eurozone;_ylt=At.cnBeEn6ck9sJT4RlyUDJZ.3QA;_ylu=X3oDMTJoaGI3amx0BGFzc2V0A25tLzIwMTAwNTA2L3VzX2V1cm96b25lBHBvcwM1BHNlYwN5bl9wYWdpbmF0ZV9zdW1tYXJ5X2xpc3QEc2xrA2ZlYXJzb2ZncmVlaw--

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- "Fears of contagion" ... "the contagion trade persists" ... Which is it? Both and therefore recursively self-feeding? Long-positioned "private investors" worried about imminent "haircuts" vs. speculators gambling on creative destruction and talking it up.

Note from March 10: Europe eyes ban on CDS contracts used against Greece
German Chancellor Angela Merkel called on Washington to back proposals for restrictions on credit default swaps used to target countries in trouble. "The US needs to make a gesture. We believe that the persistent speculation against the eurozone countries must be dealt with as soon as possible," she said. /... http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7408137/Europe-eyes-ban-on-CDS-contracts-used-against-Greece.html

[DCBob]

1. Actually the FTSE and the DAX are both up at the moment..

Curiously Asian markets were more affected today than European markets. Investors never cease to amaze.

[Ghost Dog]

2. Yes. Meanwhile, Bloomberg is spinning this:

VStoxx at 10-Month High Repels Funds as European Stocks Discounted by 13%

Europe’s biggest fund managers say the highest volatility since July makes investing in the region too dangerous even as shares are trading at a 13 percent discount to global stocks.

“We’re not buyers,” said Romain Boscher, head of equities at Groupama Asset Management in Paris, which oversees $120 billion. “If you have a one-year vision, it’s time to buy, but if your vision is one month, it’s too early. Volatility will remain very strong. The market risks reaching lower points.”

...

MSCI’s global equities gauge erased its gain for 2010 yesterday and the euro plunged to its weakest level against the dollar in a year. Three people were killed in Greek demonstrations against government austerity measures after protesters set fire to an Athens bank. Moody’s Investors Service said it may cut Portugal’s credit rating for the first time.

...


“The systemic risk is too high,” said Philipp Musil, who helps oversee $10 billion at Semper Constantia in Vienna. “The sentiment has changed from buy the dips to a problem of confidence... Our models and calculations say we normally should invest at this point,” Musil said. “Valuations are nice and first- quarter earnings have been tremendously good. On the other hand, we have the sovereign debt problem. This problem is too big.”

...


“For the past few days, we’ve had large volumes in the decline,” said Alexandre Le Drogoff, an analyst at Aurel Bgc in Paris. “That shows that the bears are controlling the market.”

... HOWEVER ...

Losses in the last two days offer a chance to invest in companies that are growing the fastest, said Mislav Matejka, head of European equity strategy at JPMorgan Cazenove in London. “The positive drivers for stocks are still tracking,” he wrote in a May 4 note. “We advise adding to stocks on dips, favoring cyclical sectors, EPS momentum and operating leverage,” he said. Matejka told clients to buy stocks in March 2009, before the biggest rally in seven decades.

/... http://preview.bloomberg.com/news/2010-05-06/vstoxx-at-10-month-high-repels-funds-as-european-stocks-discounted-by-13-.html

[AllentownJake]

3. Late reaction

Asian Markets were being punished on domestic news of their own on Monday.

Keep in mind, a falling Euro means less exporting to Europe for Asia in the long run.

[AllentownJake]

4. You can't expect your currency not to lose value

When your Central bank agrees to accept worthless bonds as collateral.

[Ghost Dog]

5. Indeed. But I see Govt. buying of its own debt is a still-pending 'nuclear option' in the eurozone,

while it's been resorted to for some time now in USD and GBP.

[AllentownJake]

6. When the Eurozone has the World's most dangerous military

to back up their currency, than maybe.

The Euro rose on the fact it wouldn't play those games, without that, it will increasingly decline in value.

The sound money idea was the selling point of the Euro as an alternative to the dollar.

The pound is going to take a beating after the election.

[madrchsod]

7. that would be the "Goldman Sachs Contagion"....

the GSC has decimated the united states and is spreading across europe. according to those who have studied the GSC there`s nothing that can be done until the host is destroyed. so far all attempts have failed.