CHART OF THE DAY: IS THE GREEK BAILOUT ENOUGH?
Interesting divergence in equities and forex overnight. The news of the Greek bailout is providing no support to the Euro as the currency has now tanked after originally trading 0.35% higher on the Greek bailout news. It’s quite clear that investors are feeling less than reassured about the future of the Eurozone on the back of the bailout.
Updated: The Euro is now trading down -0.75%. Investors were expecting a larger package so surprise over the size of the package could be adding to Euro concerns. Erik Nielsen at Goldman Sachs says the package is not big enough:
“I maintain my estimate that the total financing requirement will be about I maintain my estimate that the total financing requirement will be about €150B over the next three years, so this means that the program will not be fully financed throughout, and that the IMF and EU expect them to regain access to commercial financing probably towards the end of the second year of the program. The program is surely fully financed for the next 12 months.”
As investors digest the bailout news the worries over contagion appear to be steady as Portugal is the obvious next bogey and their problems remain entirely unresolved. Will Portugal come to the IMF with their hands out? Or is this problem now contained?
Doesn’t look good. What’ll be interesting is how sovereign yields in Spain and Portugal react. Any info there?
Euro getting bitched.
justice is served. or will it?
The general pattern is just like the sinking of Lehman. Remember the constant takeover rumors? Korea Development Bank will buy Lehman and everyone will live happily ever after…
I really don’t understand why so many people are thinking that the euro is crashing (or something like that). The euro was introduced at 1,17 then it fell to 0,8 and then rallied to 1,6. I remember that there were a lot of talks in 2006 about how much appreciation the euro zone could burden. Everyone said that the upper band the eurozone could burden was 1,3-1,35, not more. So we’re still in this upper band and the euro is still overvalued, it should trade at 1,2-1,25 (purchasing power parity). This is not a crash at all.
I think people are refering to the new realization that many of it members are insolvent and attempt to mainatian dysfunctional societies.
The (Euro) bank run will start to gather momentum. If they don’t announce a massive Euro-FDIC package soon this will be very bad news for confidence. For the rest of us, will be a trading opportunity.
Pragcap’s assessment seems to be the general consensus today. As I flip through the Greece news, other pundits seem to have the same feeling (http://www.socialnews.biz/tag/Greece). Greece was easy. Now they have to move on to Spain and Portugal and perhaps Italy. So are Germany, France and UK going to pay for everyone. And UK is not doing so hot either.