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Euro-zonked

26 September 2011

9:49 AM

26 September 2011

9:49 AM

Well, so much for that. The FTSE 100 fell as much as 1.7 per cent this morning, while overnight the euro and Asian stock markets tumbled, after Europe’s leaders
announced their grand 2-trillion-euro plan over the weekend to
drag the Eurozone out of the mire. It appears the markets are well past the point of believing that political leaders can get us out of this mess. The consensus is that the plan is not concrete
enough.

Of course, equities may recover a bit later, as they have been prone to do in past days. But the whipsawing itself is the worst sign of all; stock investors and retail-end funds are confused,
panicky and probably still in denial. The thing to look at is liquidity, at interbank lending and the institutions that are most sensitive to credit crunches, and here the indications have been
dire for weeks.

Credit default swaps on Morgan Stanley
shot to a two-year high on Friday. Goldman Sachs is expected to post a third-quarter loss – only the second time it’s not reported profits
since its IPO. Goldman’s first loss was during the Lehman crisis.

Financial News has a sobering piece this morning called A Second Credit Crunch Looms. “European debt
financing markets have all but shut down,” it says. 


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