A Greek (or Irish or Spanish or Italian or Portuguese) default would have roughly the same effect on our financial system as the implosion of Lehman Brothers in 2008. Financial chaos.
….The Street has lent only about $7 billion to Greece, as of the end of last year, according to the Bank for International Settlements. That’s no big deal.
But a default by Greece or any other of Europe’s debt-burdened nations could easily pummel German and French banks, which have lent Greece (and the other wobbly European countries) far more.
That’s where Wall Street comes in. Big Wall Street banks have lent German and French banks a bundle.
Beginning of the end is near for Greek drama | The Big Picture
After yesterday’s meeting with European Finance Ministers, they are finally facing the reality that the July 21st agreement where Greek bondholders would face just a 21% cut to the value of their bond holdings was just not enough. Said early this morning, Juncker, the European FM head, said “As far as PSI private sector involvement is concerned, we have to take into account that we have experienced changes since the decision we have taken on July 21. These are technical revisions we are discussing.” What he calls ‘technical revisions’ is a nice way of saying a bigger haircut is going to be demanded, something hopefully on the order of 50%+. While bondholders European banks included won’t like it because of a harsher mark, the bonds are already trading at distressed levels.
via Beginning of the end is near for Greek drama | The Big Picture.
Bernanke Defends Fed Focus on Unemployment
In an appearance before the Joint Economic Committee, Bernanke blamed slow-growing consumer spending, which accounts for 70 percent of economic activity, on persistently high unemployment and the gnawing fear among a growing number of Americans that their jobs may be at risk. After noting that the decline in home values and financial assets also contributed to decreasing confidence, he said “probably the most significant factor depressing consumer confidence, however, has been the poor performance of the job market.”
Wall St rallies on Europe hopes | The Australian
US stocks rallied this morning, as a report European Union finance ministers are discussing ways to recapitalise European banks fuelled a fierce comeback in the final hour of trading.
The Swiss National Bank Is Taking A Very Big Risk
The bottom line is that in August Swiss reserves rose by CHF 115b. A monthly increasing of 50% (Staggering). Domestic liquidity (sight deposits) rose an (unbelievable) 390% (CHF 49b to CHF 191B). This information covers the period when SNB bet the farm in an effort to stabilize/weaken the CHF.
……So far, the actions by the SNB have been successful. The key EURCHF rate has been steadily above the 1.20 level. The folks in Zurich/Basel are touting the SNB action as a big success. It might be a bit early to celebrate
ASX
The ASX 200 recovered slightly after a weak opening on Tuesday. Expect another test of 4000 but the index looks destined to continue in the lower half of its trend channel, with 21-day Twiggs Money Flow (holding below zero) warning of medium-term selling pressure. Target for the decline is 3500*.
* Target calculation: 4000 – ( 4500 – 4000 ) = 3500
HK and China weaken
The Hang Seng index is falling steeply, with 13-week Twiggs Money Flow below zero warning of selling pressure. Target for the current-down-swing is 16000*.
* Target calculation: 19 – ( 22 – 19 ) = 16
The Shanghai Exchange is closed for Chung Yeung Festival, but the Shanghai Composite Index was testing support at 2350 on Friday. Failure of support would offer a long-term target of 1800*.
* Target calculation: 2400 – ( 3000 – 2400 ) = 1800
NZX50
The NZX 50 index is testing resistance at 3350 after bullish divergence on 21-day Twiggs Money Flow. The index fell sharply at Tuesday’s open but had recovered all of its lost ground by the close. Breach of the declining trendline indicates that the primary trend is weakening. Breakout above 3350 would indicate another test of the May 2011 high at 3580. Reversal below 3250 is unlikely, but would re-test primary support at 3100.
Japan, South Korea selling pressure
Dow Jones Japan Index broke support at 4900, warning of another primary decline. 63-Day Twiggs Momentum holding below zero confirms a strong primary down-trend.
* Target calculation: 51 – ( 58 – 51 ) = 64
Dow Jones South Korea Index gapped sharply lower at the open, prompting a brief trading halt on the Korean exchange. 21-day Twiggs Money Flow holding below zero warns of strong (medium-term) selling pressure. Failure of support at 360 would test 330 in the short-term, but the calculated target is 290*.
* Target calculation: 360 – ( 430 – 360 ) = 290
TSX 60 breaks support
Canada’s TSX 60 index broke support at 650, while declining 13-week Twiggs Money Flow signals rising selling pressure. Expect another down-swing with a target of 580*.
* Target calculation: 650 – ( 720 – 650 ) = 580