Skip to comments.Billions wiped off Europe's biggest companies as political rebellion rocks eurozone
Posted on 04/23/2012 2:34:47 PM PDT by bruinbirdman
More than £122.3bn was wiped off the value of Europe's biggest companies on Monday amid fears that the eurozone's commitment to austerity was being swept away by political rebellion - just as its debts hit record levels.
Stockmarkets plunged as traders panicked that Angela Merkel could lose her key allies in France and the Netherlands and that the debt crisis rescue plans could unravel.
The Dutch prime minister Mark Rutte, who is one of the eurozone's "hardliners" on fiscal discipline, dramatically quit in the wake of his coalition's refusal to accept Europe's debt pact. Snap elections could be called as early as June.
Traders were also rattled by Francois Hollande's victory over Nicolas Sarkozy in the first round of the French presidential election. The socialist Mr Hollande has vowed to renegotiate the fiscal pact that including a 3pc of GDP deficit limit.
The political concerns were compounded by data that showed eurozone debt has hit 87.2pc of GDP - the highest level since the launch of the single currency in 1999. Eurostat said that the 17 eurozone members had reduced their deficits from 6.2pc of GDP in 2010 to 4.1pc in 2011 - but overall debt levels had risen by 1.9pc.
Spain, meanwhile, officially sank back into recession as the economy shrank 0.4pc in the first quarter of the year, and German manufacturing shrank at its fastest rate for three years in March. The French composite PMI also fell, according to Markit.
By the end of the day, the Stoxx Europe 600 index has sunk 2.3pc to its lowest level for three months. The German Dax dropped 3.4pc, while France's CAC and Spain's Ibex were down 2.8pc each. In London, the FTSE 100 closed down 1.9pc. American markets dropped on opening.
Borrowing costs for the core
(Excerpt) Read more at telegraph.co.uk ...
The mere threat of socialists taking control of Europe is enough to collapse the markets. You’d think the euroweenie voters would see the connection but all they can see is their right to access someone else’s wallet.
Hate to say, this is coming to the USA sometime soon.
Not be contrarian, BUT.....
Might this not result in a plus for the US. First off, a liquidity transfer boosting (albeit artificially) US holdings. Second, a drop in the Euro lowers the currency premium on oil.
Looks like Europe is in a fork in the road, with either option quite uncomfortable.
We would do well to take a lesson from it, but we lack the self control.
Socialists and other leftists in Europe and the USA are determined to destroy western civilization and bring about a new version of the Dark Ages.
I don’t think this is a market reaction to the elections in France; more of a market reaction to the sale of recent Spanish debt, and the revelation over the weekend that every penny of it was bought by ECB.
As long as the rest of the world doesn’t remove the dollar as the reserve currency you may be right. I can’t see why they would, well, other than our galactic sized debt...and the now not-so-”secret” meetings they are having discussing this very issue.
Hollande will try to raise the wealth tax as well as income tax. Raise capital gains and dividend tax. A sell-off in anticipation of this would be expected.
Spanish bond rates reflect the overall status of EZ, therefore receives less emphasis. Except for The Telegraph. We'll see that tomorrow along with the fall of Netherlands' government for economic rreasons.
Hollande fell flat on his face, when compared to expected results as prognosticated on Friday. He got fewer votes than expected, and his supporters were less sure if they'd support him in the second round. Le Penn got far more votes than were expected, nearly twice as much - a whole lot of liberals are looking at national treasuries as things to loot for votes, and not seeing the enthusiasm they expect out there.
I don't see that as a negative for the market. Could Hollande win? Sure. But it appears much less likely today than predictions were on Friday.
But what about the Dutch government - their failure to come to an agreement on austerity measures. The current government wanted to do it on the backs of retirees. Wilder's party demanded that any cuts first hit the immigrants, and that it be tied to reductions in immigration, and opting out of EU laws in regards to immigration. They also demanded that recent immigrants not be able to be vested in the national retirement, and be excluded from various programs.
His party's Dutch first attitude should do well in the upcoming elections, and represent a positive for the markets. All in all, the one critical piece of news was those Spanish auction results, which meant that there was drastically less money to bail out the PIIGS than people had calculated. That, combined with internal anger at the Spanish government for wasteful attitudes while at the same time demanding more from the people, meant Spain is no where near where the market expected them to be.
I could be way off on this, but I went with shorting the market as soon as the news on Spanish auctions broke.
The futures market this morning showed the shorts.
In any event, less reported but as important is the vast capital flight from periphery countries. Capital flight includes selling stock in international corporations that are reflected on the NYSE also
For an interesting introduction of what EU academics are looking at, check out the first few paragraphs here (p.2), there is also much more depth if one likes:
There is, perhaps, a more pertinent question than the old one about the chicken and the egg. Which came first, the “strategy” or Cloward and Piven?