It looks like the good vibes in Europe resulting from the passing of the Greek austerity measures on Sunday may have already fizzled out. Earlier today Greece reported worse than expected GDP figures for the previous quarter: -7% (annualized) vs -5% expected. One of the fears has always been that by imposing austerity measures too drastically or too quickly, Greece may be forced into a deflationary spiral. The reaction in the equity markets was severe with all four of the Greek equity indexes that we track dropping by over 5% and the benchmark FTSE/ASE Index dropping by almost 7%. Here are the top 10 declining equity indexes from today's session:
As usual, Greece's conjoined twin Cyprus felt the effects as well, with the General Market Index CSE dropping 5.1%. Not to diminish the importance of our Cypriot friends but the primary focus of the authorities in Europe and other markets around the world had to be preventing the contagion to spread further to the next country in line: Portugal. Luckily for Portugal and the rest of Europe, there was little sign of any metastasizing, yet. Portugal's benchmark equity index was only down half a percent and its 5 year CDS only climbed .8%. But that's not to say that there were zero ripple effects outside of Greece and Cyprus. Several other European countries saw sizable gains in their 5 year default swaps. Here's the top 10:
Four out of the top five gainers in that list are considered part of the 'core' of the EZ that is expected to provide the backstop for everyone else. If the borrowing costs of these other countries continue to rise, they are going to lose by the ability and the desire to provide bailout funds for others.
No comments:
Post a Comment