October 25, 2011 at 09:31 AM EDT
Europe’s Debt Crisis Options Still Iffy!
Tuesday, October 25, 2011. 9.25 a.m. No one expected that cobbling together a massive rescue plan in a rush, after 18 months of applying only temporary bandages, would be easy. Too many conflicting interests. The world is supposed to get the answers from tomorrow’s summit. So far all we know is that: Investors in Greece’s [...]

Tuesday, October 25, 2011. 9.25 a.m.

No one expected that cobbling together a massive rescue plan in a rush, after 18 months of applying only temporary bandages, would be easy. Too many conflicting interests.

The world is supposed to get the answers from tomorrow’s summit.

So far all we know is that:

  1. Investors in Greece’s bonds, mostly international banks, will be asked to take a voluntary loss of 60% on the bonds, rather than the 21% they agreed to in July as part of the most recent failed rescue effort. The Institute of International Finance, representing the bond-holders, says there is a limit to what could be considered voluntary. The bond-holders have apparently offered to now take a 40% loss.
  2. Negotiations are still underway on the details of how to leverage the European Financial Stability Facility rescue fund, and by how much. Two proposals are apparently being considered. One would have the EFSF insure bond buyers against losses, and the other would create a new fund to attract outside investors.  
  3. Germany’s chancellor Angela Merkel has reversed her previous stance and has agreed to have the German parliament vote tomorrow on any proposed measures before she signs off on a deal.
  4. Officials are reported to also be considering several proposals to involve the International Monetary Fund more aggressively, possibly attracting more financial help from countries outside of Europe, which could be used to lend money directly to troubled eurozone countries through the purchase of their bonds. But larger involvement by the IMF is opposed by the U.S., the U.K., Canada, Australia, and Japan.
    Let’s hope they’re a lot further along with the decisions and agreements behind the scenes than has leaked out.
    Because the risk from another disappointing plan is obvious.
    For instance, the spread in credit default swaps, used by banks and large investors to insure their risk against defaults, are back at the all-time highs seen in 2008, which foretold the collapse of Lehman Brothers and the 2008 financial crisis.
    And while economic reports on the U.S. economy have been showing signs of improvement, the economies of Europe continue to slide closer to recessions. It was reported yesterday that the eurozone’s PMI business index fell sharply in October, to 47.2 from the already dismal 49.1 in September. 
    To read my weekend newspaper column ‘If Only We Could Ignore Europe!’ click here!

Subscribers to Street Smart Report: We will have an in-depth ‘Global Markets’ report in the subscribers’ area of the Street Smart Report website later today, and the regular in-depth Mid-Week U.S. Market update will be there tomorrow.

Yesterday in the U.S. Market.

A positive day, nice follow through to Friday’s rally. Still on low volume of less than 1 billion shares traded on the NYSE.

The Dow closed up 104 points, or 0.9%. The S&P 500 closed up 1.3%. The NYSE Composite closed up 1.6%. The Nasdaq closed up 2.4%. The Nasdaq 100 closed up 2.1%. The Russell 2000 closed up 3.3%. The DJ Transportation Avg. closed up 1.8%. The DJ Utilities Avg closed down 0.4%.

Gold closed up $15 an ounce at $1,651.

Oil closed up $4.16 a barrel at $91.56.

The U.S. dollar etf UUP closed down 0.2%.

The U.S. Treasury bond etf TLT closed up 0.2%.

Yesterday in European Markets.

Markets in Europe closed up yesterday. London closed up 1.1%. The German DAX closed up 1.4%. France closed up 1.6%.

Asian Markets Were Mixed Last Night.

The DJ Asia-Pacific Index closed unchanged.

Among individual markets:

Australia closed down 0.6%. China closed up1.7%. Hong Kong closed up 1.0%. India closed up 1.9%. Indonesia closed up 0.1%. Japan closed down 0.9%. Malaysia closed up 0.4%. New Zealand closed up 0.2%. South Korea closed down 0.5%. Singapore closed up 0.3%. Taiwan closed up 0.3%. Thailand closed up 2.9%.

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Markets This Morning.

European markets are mixed. The London FTSE is down 0.5%. Germany’s DAX is up 0.3%. France’s CAC is down 1.1%

Oil is up $2.34a barrel at $93.61.

Gold is up $7 an ounce at $1,658 an ounce.

This morning in the U.S. Market:

This week is a fairly heavy week for potential market-moving economic reports, including Consumer Confidence, Durable Goods Orders, New home Sales, and the first look at 3rd quarter GDP growth. To see the full schedule of the week’s reports click here, and look at the left side of the page it takes you to.

Yesterday’s report was that the Chicago Fed’s National Business Activity Index remained negative in September but improved to minus 0.22 from minus 0.59 in August. The 3-month moving average rose to –0.21 from –0.28 in August, the 2nd monthly improvement, putting it a bit further away from the –0.70 that has marked the beginning of all the recessions since 1970.

This morning it was reported that the Housing Price Index showed house prices rose 0.2% in August.

Still to come are New Home Sales at 10 a.m.

Pre-open indicators have turned negative in the last hour or so.

Our Pre-Open Indicators:

Our pre-open indicators are now pointing to the Dow being down 75 points or so in the early going.

To read my weekend newspaper column ‘If Only We Could Ignore Europe!’ click here!

Subscribers to Street Smart Report: We will have an in-depth ‘Global Markets’ report in the subscribers’ area of the Street Smart Report website later today, and the regular in-depth Mid-Week U.S. Market update will be there tomorrow.

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I’ll be back Thursday morning with the regular Thursday morning post, at 9:25 a.m. (This blog appears every Tuesday, Thursday, and Saturday morning!).

**** End of Today’s post*****

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