Stocks in Asia, Europe and North America are falling as contagion from the
Greek debt crisis continues to impact markets worldwide. Until there is some
resolution, investors should expect this to continue along with intermittent
sharp moves up thanks to central bank liquidity injections. Trouble began in
Asia last night with the Hang Seng in Hong Kong falling 537 points, or 2.8%. It
closed at 18,918, well below the critical 20,000 support level. The Indian
Sensex was down 188 points, or 1.1%, to 16,745. It has been leading Asian
markets down and is trading on top of a very large gap made in May 2009. The
Nikkei in Japan managed to buck the trend and close up 195 points to 8,864 or
2.3%. It has been mostly trading below key support at 10,000 since March when
the Tohoku earthquake struck. All three markets are in a technically bearish
trading pattern. No part of the globe can escape what is happening in Europe. EU
finance ministers said Friday they would delay authorizing a new installment of
emergency funds for Greece until October. Greece still is on its first 110
billion euro bailout, but the final payments have yet to be made. A second
bailout has yet to be fully approved, although the terms have been set. Greeces
fiscal situation continues to deteriorate rapidly despite all the funding it has
received from the EU and the IMF. The bailout money is life support for Greece.
If the plug is pulled, the patient defaults. German stocks have been hit the
hardest by the Greek crisis and have fallen well into bear market territory.
After rallying from a severely oversold level last week, the DAX was down 157
points or 2.8% on Monday. The French CAC-40 was down 91 points or 3.0%. The
British FTSE was down 108 points or 2.0%. U.K. stocks have been less affected by
events in Greece (the U.K. is not part of the euro zone). As is the case in
Asia, all major European markets are in a technically bearish trading pattern.
U.S. stocks actually have held up somewhat better than most other markets. The
S&P 500 and small-cap Russell 200 have the same negative technical picture found
elsewhere, but the Dow Industrials and Nasdaq have so far held just above it. In
early afternoon trading, the Dow was down 205 points, or 1.8%; the S&P 500 21
points, or 1.7%; the Nasdaq 30 points, or 1.2%; and the Russell 2000 14 points,
or 2.0%. A report released in the morning indicated that U.S. investors have
pulled more money out of equity funds since April than they did during the five
months after Lehman Brothers collapsed. The real history making news, however,
was in the bond market, where the two-year Treasury hit an all-time low yield of
0.1491% a sign of a global credit crisis if ever there was one. Investors
should expect more market drama from the unfolding Greek tragedy in the coming
weeks and months. Unless Germany and France are willing to commit to unlimited
bailouts, Greece eventually will default. Only then will we know how this
affects Ireland, Portugal, Spain and Italy and the euro itself. Stocks are
vulnerable to more volatility and downside until this occurs. Disclosure: None
Daryl Montgomery Author: Inflation Investing A Guide for the 2010s Organizer,
New York Investing meetup http://investing.meetup.com/21 This
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