One crazy week begins with global markets getting creamed without US markets trading.
Labor Day afternoon shows the beginning of the cratering of the EU. Greek bonds show default is almost certain with 2-yr bonds at 52% yield.
Italian bank stocks and CDSs are moving in opposite directions. Equity prices at year lows while cost of capital to banks has risen to new highs.
Other EU banks in Spain, France and Belgium having difficulties accessing overnight funds, aka 2008.
Stefaan Decraene CEO of Dexia, the second largest bank in Belgium behind Fortris has resigned. Dexia has been labeled as a troubled bank for the last six months.
German banking execs including Deutsche Bank’s Ackmann preaching that a bailout is needed as many EU banks cannot price sovereign bonds on market-to-market basis because they would be labeled insolvent for their exposure.
Spot gold prices closed above $1,900 an ounce on fears that EU banks will be shuttered before Jean-Claude Trichet can get a Union bond offering together. The bond may be backed by gold in some weight, whether it will be 50% backed or 5% backed, which is the level far more likely to be enacted because there is not enough of the precious metal to do any larger level for the amount of funds needed to bailout the Euro.
I would say the future of the euro is bleaker and could be severely altered or even gone by year’ end.