By Margreet Dietz
Not even Facebook, the most anticipated initial public offering in the last year, could dodge the virus known as the euro debt crisis and there’s no sign yet of a new or more intense course of treatment.
In fact, EU officials appear to be signalling a determination to do as they have been doing.
“We will do whatever is needed to guarantee the financial stability of the euro zone,” European Council President Herman Van Rompuy said, speaking at Camp David, the presidential retreat outside Washington. But no major new approach is planned, he added.
EU leaders, however, will meet for dinner in Brussels this week, on Wednesday, to discuss how to bolster growth ahead of a summit next month.
Financial markets remain unimpressed and risk aversion is rising for good reason: Greece is heading to fresh elections next month and a potential ‘Grexit from the euro, while Spain’s finances appear to be spiralling out of control.
The failure of Facebook’s shares to end markedly higher after debuting on the Nasdaq on Friday was the surest sign yet that optimism has given way to wariness, if not outright pessimism.
Volatility is returning with a vengeance too, even though it is at the lower end of the scale. The Chicago Board Options Exchange SPX Volatility Index, or Wall Street’s fear gauge, is 44 percent higher than a year ago and is now at its highest since December.
On Friday the Standard & Poor’s 500 Index fell for a sixth straight day and recorded its worst week since November on growing concerns that global growth will suffer from the euro zone’s problems and signs of a slowing US recovery.
For the week, the Dow Jones Industrial Average fell 3.5 percent, the S&P 500 declined 4.3 percent and the Nasdaq was down 5.3 percent.
“We sort of hit an air pocket in terms of positive catalysts and meanwhile Europe keeps weighing on the market,” John Kattar, chief investment officer at Eastern Investment Advisors in Boston, told Bloomberg News.
Last week wasn’t much better for shareholders in Europe either, with banks pacing stocks lower. The UK’s FTSE 100 declined 5.5 percent. France’s CAC 40 lost 3.9 percent and Germany’s DAX slid 4.7 percent. Greece’s ASE Index plunged 10 percent.
Meanwhile, the euro declined for the third straight week against the greenback, dropping to the weakest level in four months on Friday, while falling for the fourth week against the Japanese yen, according to Bloomberg.
"This whole European situation has been managed via crisis," Didier Saint-Georges, a member of the investment committee of Carmignac Gestion, told Reuters. "You only make progress each time after getting pretty close to the cliff."
And another cliff is fast approaching.
Oil has been suffering as a result of concern about the economic outlook, too, with crude shedding 4.8 percent in the last week.
Purchasing managers' data are due this week for France and the euro zone, and no good news is pending. Germany is working hard to offset the weakness everywhere else in the region but there are limits.
The influential German Ifo survey of business sentiment for May, also due on Thursday, will provide further clarity on whether Germany is at risk of losing momentum because of the crisis, Reuters reported.
In the US, earnings season is over but for some stragglers. There will be some economic data but it’s unlikely to be significant enough to alter bets on how the recovery is faring.
There will be April's US existing home sales on Tuesday and new US homes sales figures are due on Wednesday. On Thursday, there are initial US jobless claims and US durable goods orders.
(BusinessDesk)
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And on the EU some notes from Camp David (courtesy of Zero Hedge). Its always better to laugh than cry!
Preamble
1. We, the Leaders of the Group of Eight, met at Camp David on May 18 and 19, 2012 to address major global economic and political challenges (and to get out of our countries for a few days where things are getting downright oppressive).
The Global Economy
2. Our imperative is to promote growth and jobs, but we are failing miserably and do not have a clue what to do…
3. The global economic recovery shows few signs of promise, significant headwinds persist and we have not agreements on key areas of need. Each day the ECB gets more overextended and is without a plan. Below we offer up some nice sounding verbiage that won’t do a thing…
4. Against this background, we commit to take all necessary steps to strengthen and reinvigorate our economies and combat financial stresses, recognizing that the right measures are not the same for each of us and that each of us is likely to fail do exactly what is needed. Germany is more likely to be too austere; Greece is more likely to be too slow to implement any meaningful reforms. Political impasse in Greece continues to point a loaded gun at the head of the euro-or would do so if the euro had a head. Instead the gun is pointed at its financial groin.
5. We welcome the ongoing discussion in Europe on how to generate growth, while maintaining a firm commitment to implement fiscal consolidation to be assessed on a structural basis. This phrasing means nothing to everybody in Europe (or something different to everyone)! We agree on the importance of a strong and cohesive Eurozone for global stability and recovery, and we affirm our interest in Greece remaining in the Eurozone while respecting its commitments. This statement is 180 degrees at odds with where Greece seems to be politically at the moment, but the G-8 can agree on it and it sounds good. It does not reflect any new or existing consensus in Greece, unfortunately. We all have an interest in the success of specific measures to strengthen the resilience of the Eurozone and growth in Europe. But, again, we haven’t the foggiest idea how to do get it. We support Euro Area Leaders’ resolve to address the strains in the Eurozone in a credible and timely manner and in a manner that fosters confidence, stability and growth, but we cannot agree on what these things are, so don’t hold your breath waiting for results.
6. We agree that all of our governments need to take actions to boost confidence and nurture recovery including reforms to raise productivity, growth (this is the German part of the statement) and demand (this is the Greek and French and Italian/Spanish/Portuguese part of the statement) within a sustainable, credible and non-inflationary macroeconomic framework (this is the fanciful part of the statement). We commit to fiscal responsibility and, in this context, we support sound and sustainable fiscal consolidation policies that take into account countries’ evolving economic conditions and underpin confidence and economic recovery (This is the totally oxymoron part of the statement; a bit like the line in the old Blood Sweat and Tears song...’you can help yourself but don’t take too much’).
7. To raise productivity and growth potential in our economies, we support structural reforms, and investments in education and in modern infrastructure, as appropriate (note, not as inappropriate…). Investment initiatives can be financed using a range of mechanisms, including leveraging the private sector (where it is not already dead or too busy avoiding paying taxes). Sound financial measures, to which we are committed, should build stronger systems over time while not choking off near-term credit growth. (…unless, of course, we actually implement them in which case growth of all sorts is likely to be choked off even more. But for now we can stand agreeing that we are ‘committed to them’ as long as we do not have to DO anything).
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