Stocks Slide, Euro Weakens on Government Debt Concern

Source: Bloomberg

May 5 (Bloomberg) -- Stocks fell around the globe, erasing the 2010 gain for the MSCI World Index, and the euro weakened to a 12-month low on concern Greece’s bailout may have to be extended to other indebted nations.

The MSCI gauge of equities in 23 developed nations declined 0.7 percent at 8:42 a.m. in New York, leaving it down 0.5 percent for the year. Spain’s IBEX 35 Index slumped 2.6 percent. The MSCI Emerging Markets Index lost 1.8 percent, heading for the biggest three-day slump in three months. Futures on the Standard & Poor’s 500 Index retreated 0.8 percent. The euro traded at less than $1.30 for a second day. Copper slid below $7,000 a metric ton.

More than $1.1 trillion was wiped from the value of global stocks yesterday amid growing expectations that Greece’s 110 billion-euro ($143 billion) rescue package will need to be repeated in Spain and Portugal. European Central Bank council member Axel Weber said today there is a threat of “grave contagion effects” in the euro area.

“We are in an era where governments are no longer considered risk free,” said Gary Jenkins, head of credit strategy at London-based broker Evolution Securities Ltd. “The capital markets could soon be in the midst of the largest financial crisis of the last 100 years.”


Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=azVDs2aKedKo&pos=1

This thing is going to get a lot worse before it gets better.

The potential for Euro to reach parity is possible (not likely yet but at least possible).
That isn't something that was even considered a couple years ago.

I remember the Euro being below $0.90. Then something happened: Bush.

Now the dollar is like the least ugly choice hence a flight to the dollar.

Not sure that will be sustained long term because we are still spending money we don't own like it is unlimited but in short term I think Euro will continue to tank.

Greece is just the beginning.