Markets Decide They Don't Like European Deal After All

Discussion in 'Wall St. News' started by S2007S, Dec 12, 2011.

  1. S2007S


    You just have to love whats going on, everyday another headline is moving the market, you just have to sit back and laugh....who would want to put any money into this market, meaning what long term investor would want to place money into a market that moves up and down 100-200 points this point people are realizing or have realized there is no such thing as investing anymore...with 70%+ of all trades being HFT whats the point of even investing. Way TOO much volatility for anyone who is close to retirement to handle.

    So I guess tomorrow the markets will be up 200+ points on news Europe has contained the crisis for good.

    Markets Decide They Don't Like European Deal After All
    Reuters | December 12, 2011 | 11:59 AM EST

    After rallying on Friday, markets in the US and Europe tumbled Monday as investors judged that last week's pact to bind EU economies closer together would fail to quell its financial crisis.

    Markets are chiefly concerned by a perceived failure of leaders to break the deadlock over more decisive involvement of the European Central Bank , which many analysts say is the only way to put an end to the crisis.

    They also worry that Friday's deal shows Europe's only answer to the crisis is scything budget cuts which will result in years of poor growth and potentially derail the overall effort to put public finances back on track.

    "The austerity measures will have a profoundly negative impact on economic growth and will make 2012 a very challenging year in economic terms," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets.

    Wall Street traded sharply lower, while European stocks also plunged.

    The euro [ EUR=X 1.3182 -0.0199 (-1.49%) ] slid and borrowing costs for Italy and Spain rose as investors weighed last week's summit that split the European Union, with Britain blocking treaty change and forcing euro zone countries to negotiate a fiscal accord outside the Union.

    "There is a deflated feeling for the euro this morning after the EU summit," said Beat Siegenthaler, currency strategist at UBS. "People were looking for a greater response and more importantly the ECB refused to significantly step up their bond buying."

    The sell-off pushed 5-year Italian government bond yields up 36 basis points to above the key 7 percent level ahead of a fresh debt sale due on Wednesday. The rise came after traders said the ECB had intervened to buy short-term Italian debt .

    Friday's initial market rally petered out in less than 24 trading hours due to legal uncertainty surrounding the new pact and the absence of an unlimited financial backstop for the single currency.

    At the center of analysts' criticism of the EU deal are doubts that it will make its fiscal rules any more enforceable in practice than they have been in the past.

    In the short-term, the biggest worry for many is that most of the economies in trouble do not look capable of generating enough growth to pay off their debts — and budget cutbacks will just make that calculus worse.

    "In and of itself these proposals aren't fiscal union at all," said Megan Greene, senior economist at Roubini Global Economics. "They just really institutionalize the asymmetric adjustment that's been occurring in the euro zone already with the peripheral countries making all of the adjustment, (and) the core countries making none of it."

    "As the peripheral countries continue to implement harsh austerity measures, it will undermine GDP growth," Greene said. "So we won't see growth in the euro zone for a few years as long as this is the case."

    Moody's Investors Service said it would revisit the ratings of European nations in the first quarter of 2012, after last week's summit failed to produce decisive initiatives and left the euro area prone to further shocks.

    "The absence of measures to stabilize credit markets over the short term means that the euro area, and the wider EU, remain prone to further shocks and the cohesion of the euro area under continued threat," it said in a report.

    The chief economist of fellow agency Standard and Poor's in Europe said there would need to be more summits and that time was short.

    "Time is running out and action is needed on both sides of the equation, on the fiscal and monetary side," Jean-Michel Six told a business conference in Tel Aviv.

    Leaders probably needed another shock before everybody in the euro zone reads from the same page, for instance a major German bank experiencing some real difficulties on the markets — which he said was a genuine possibility in the near term.

    French President Nicolas Sarkozy said the legal basis of a new accord to enforce debt and deficit rules in the 17-nation euro area with quasi-automatic sanctions and intrusive powers to reject national budgets would be worked out before Christmas.

    "In the next fortnight, we will put together the legal content of our agreement. The aim is to have a treaty by March," Sarkozy told newspaper Le Monde in an interview.

    An EU diplomat said the first draft of the new treaty would be ready by early next week. Sarkozy said the aim was to have it ratified by all member states except Britain by June.

    "You have to understand this is the birth of a different Europe—the Europe of the euro zone, in which the watchwords will be the convergence of economies, budget rules and fiscal policy. A Europe where we are going to work together on reforms enabling all our countries to be more competitive without renouncing our social model," the French leader said.

    Traders said the ECB intervened to buy short-term Italian debt after yields on Italian and Spanish debt spiked.

    The central bank revealed on Monday it had slashed bond purchases in the week before the EU summit as it raised pressure on the bloc's leaders to introduce tighter debt controls and make further public spending cuts.

    It bought just 635 million euros in bonds in the week to Dec. 9 compared to 3.66 billion the previous week. ECB sources told Reuters on Friday purchases would remain limited with a maximum ceiling of 20 billion euros a week.

    There is no prospect of a "big bazooka" to shock markets.
  2. I'm still investing long term in the markets in my 401k. Why would anybody close to retirement be investing in stocks anyway?