Greek Default Speculation Drives Global Banking and Stock Exodus
A tough day for global traders has been especially intense in the banking sector Monday. A bad brew of news and rumors has the group giving back significant ground this morning. It started last week, when rumors surfaced that seemed to be positioning Germany for exit on Greece. Speculation has built around a Greek default idea, and investors likening it to a Lehman event (and some) have stocks sinking today, with the dollar muscling up and commodities mostly lower as a result. 
Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.Greek Default Speculation Drives Global Banking and Stock Exodus
| GLOBAL MARKETS | COMMODITY FUTURES & USD | ||
| Dow | -0.9% | Dollar Index | +0.9% |
| S&P 500 | -0.8% | WTI Crude | +1.6% |
| NASDAQ | -0.2% | Gasoline RBOB | -0.2% |
| Euro Stoxx 50 | -3.8% | Natural Gas | -0.3% |
| FTSE 100 | -1.6% | Gold | -1.9% |
| DAX | -2.3% | Silver | -2.2% |
| NIKKEI | -2.3% | Wheat | -0.8% |
| Hang Seng | -4.2% | Corn | -0.1% |
| S&P / ASX 200 | -3.7% | Lumber | -3.7% |
| Prices measured at 12:10 PM ET | |||
Overseas activity is dictating the tone of trading today. Greek Prime Minister Papandreou’s Saturday address included more promises that other Europeans and investors seem to think will prove useless. His latest flail against the will of his people is a plan to raise real estate taxes to help with debt payments to the IMF and EU. Papandreou ensures the collection of this new tax by attaching them to utility payment collections. So, unless Greeks are willing to live without water and electricity, they will pay them. However, Greeks don’t have to like it.
The global community is paying more attention to the Greek people today, who protested en masse again Saturday. The Greek government is not secure, and losing its grip further with each new austerity measure. At the same time, the rest of Europe is losing its will under amassing domestic political pressures. Germany is now openly thought to be preparing its banks for a Greek default. This is a scenario that raises speculation about European Union and euro zone unraveling. It’s a Lehman-like plot that investors are worrying about today, and so European banks are in trouble as a result.
| BNP Paribas (OTC: BNPQY.PK) | -11% |
| Deutsche Bank (NYSE: DB) | -6.5% |
| Societe Generale (OTC: SCGLY.PK) | -6.3% |
| Credit Agricole (OTC: CRARY.PK) | -8.9% |
| Banco Santander (NYSE: STD) | -8.6% |
| National Bank of Greece (NYSE: NBG) | -7% |
| Bank of Ireland (NYSE: IRE) | -2.6% |
| Allied Irish PLC (OTC: AIBYY.PK) | -6% |
| Lloyd’s (NYSE: LYG) | -2.6% |
| Barclays (NYSE: BCS) | -1.9% |
| UBS (NYSE: UBS) | -1.4% |
| Credit Suisse (NYSE: CS) | -2.1% |
| RBS (NYSE: RBS) | -3% |
| Prices measured at 12:30 PM ET |
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United Kingdom banking regulators levied expensive reforms against the Kingdom’s largest institutions in order to protect taxpayers from future failures and financial bailouts. The reforms are expected to cost U.K. banks $11.12 billion annually.
U.S. banks with global exposures have not been left out of the day’s demise, with Citigroup (NYSE: C) illustrating that down 1.5%, Goldman Sachs (NYSE: GS) down 1.7% and Morgan Stanley (NYSE: MS) off 2.8% at 12:37 PM ET. Adding to the pile, Citigroup cut its forecasts for U.S. bank earnings by an average of 45% on European driven impact to global equity and credit markets.
President Obama Introduces Jobs Bill
The President followed through on his jobs speech by today presenting his bill to Congress. He spoke with teachers and construction workers by his side, putting a non-political face to his message. His hope is that the American people will force his political opponents to act in favor of economic stimulus. The long-term American unemployed and the currently threatened were urged to write their Congressmen. But, Nobel Economic Laureate, Paul Krugman, says the chances of the President finding political support are zero now. He says the Republican Party would even vote down a bill to honor motherhood today if the President proposed it. Krugman ominously compared the current period to the period of austerity that led to The Great Depression.
The National Association for Business Economics (NABE) is holding its annual meeting, and Dallas Federal Reserve President Richard Fisher will discuss monetary policy in a global context in a 5:00 PM address.
Republican candidates for president will debate again this evening, this time in Tampa, Florida. This Tea Party themed debate kicks off at 8:00 PM ET.
Corporate Wire
In concert with CEO Brian Moynihan’s presentation at the Barclays Capital Global Financial Services Conference in New York, Bank of America (NYSE: BAC) issued a press release on its reorganization, stating that it would eliminate about 30K jobs while saving $5 billion per year by 2014. BofA had been moving counter to the market trend, but is down 0.4% at 1:00 PM ET. Also at the Barclay’s (NYSE: BCS) conference, look for presentations by NYSE Euronext (NYSE: NYX) and Unum Group (NYSE: UNM).
McGraw-Hill (NYSE: MHP) said it would split into two companies with segments focused on global markets and textbook publishing. The company had come under pressure from shareholder activist Jana Partners LLC to do so. The transaction would likely be completed in 2012 and come about via a tax-free spin-off of the education unit.
Broadcom (Nasdaq: BRCM) agreed to buy NetLogic Microsystems (Nasdaq: NETL) for $3.7 billion in cash. NETL shareholders got a nice surprise today, as the $50 effective price is 57% higher than the close of trading on September 9.
The rest of the corporate news has shareholder and/or analyst days at Juniper Networks (Nasdaq: JNPR), Coca-Cola Enterprises (NYSE: CCE) and W.W. Grainger (NYSE: GWW). Look for EPS reports from Brady Corp. (NYSE: BRC), Electromed (Nasdaq: ELMD), Napco Security Technologies (Nasdaq: NSSC), Optical Cable (Nasdaq: OCC), Pharmacyclics (Nasdaq: PCYC), pSivida (Nasdaq: PSDV), Streamline Health Solutions (Nasdaq: STRM), ThermoGenesis (Nasdaq: KOOL) and a few more.
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