The market mood across Europe was decided before the sun rose Tuesday. Pressure is intensified around Greek political leaders, as the IMF and EU are refusing to continue aid flows to Greece without written pledges by both major parties. Political bias across euro zone members has a disjointed union treading water. Thus, European shares were doomed today and will be so moving forward without political will and finally a determined path.
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.
The troika is seeking written pledges from Greek political parties stating that they will pursue the austerity path agreed to through the February election and beyond. The entire situation has effectively placed Greece’s new Prime Minister Lucas Papademos on a stick for February roasting. The busy new PM met with the President of the Euro Group today, Jean-Claude Juncker, likely answering questions on this matter. The risk to U.S. investors here is of course of contagion across Europe, and the unclear result of a Greek default and falling out from the eurozone.
Forces are pressuring for the European Central Bank (ECB) to step up its bond purchase activity and for the EU to issue euro bonds. Such action would effectively force the significant investment of all European participants in regional recovery. They would have significantly increased vested interests, and so the Germans, with the farthest to fall from their state of independent grace oppose the idea. This division has raised doubts, at least here, about the EU’s ability to survive the crisis intact. And with global market entanglement, there would be no escaping a European downfall for U.S. investors. If the American banking risk outlined recently by Fitch, is not enough to get us, the deteriorating economies of Europe should weigh heavily enough.
European shares were down on the day as a result, with the Euro Stoxx 50 down 1.1%, the DAX off 1.2%, CAC 40 down 0.8% and the Athex Composite short 2.0%. European banking shares were off, with Deutsche Bank (NYSE: DB) down 0.9%, Banco Santander (NYSE: STD) off 2.5%, UBS (NYSE: UBS) down 0.9%, Credit Suisse (NYSE: CS) off 0.8%, Barclays (NYSE: BCS) off 3.0% and Lloyds (NYSE: LYG) down 5.1%.
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