Let’s get right to the heart of things. It’s the credit writedowns. They are coming and they are large.
First, is Deutsche Bank coming in with a 4.8 billion Euro loss for the quarter. That’s massive. The word on the street is that Deutsche will get a bailout from the German government much as Commerzbank did. That may be one reason the Germans have taken their head out of the sand on stimulus. German banks are not looking so good. And, remember, Deutsche has HUGE U.S. commercial real estate exposure. So there’s more to come.
Then, there’s HSBC, they have glided along serenely since stating the credit writedown daisy chain back in February 2007, almost two years ago. Again, the word on the street is that there’s more of that coming. They may need as much as 30 billion in additional capital. Now, if the two best banks are in trouble in the UK, what do expect we’ll see at the likes of RBS, the world’s largest bank by assets. Lloyds is almost half-owned by the government and HSBC needs to top up capital by 30 billion, you start to realize that Iceland is not the only country with an outsized banking sector.
You’ve got Ireland and Switzerland with the exact same problems. And the Eastern European losses are going to come to Austria, Denmark and Sweden as well. So, Europe’s banks are looking very weak right now and that is going to depress shares across the board.
As for other news, read the links below and see the news feed for additional takes.
Hillary’s Day – Swampland – TIME.com
Yahoo to Name Bartz as CEO – WSJ.com
Portugal Long-Term Credit Rating May Be Cut by S&P – Bloomberg.com
S&P affirms top credit rating for ‘stable’ Canada – National Post
Junk Debt Showing Great Depression Defaults Lures TCW – Bloomberg.com
Argentine Peso Worst Latin Currency on Devaluation – Bloomberg.com
Merkel’s Coalition Forges $66 Billion Stimulus Plan – Bloomberg.com
Trading like it’s 1697 – FT Alphaville
Hong Kong – No. 1 freest economy – fin24.co.za
Lenders set to withhold interest rate cut by ECB – Independent Ireland
Nederlandse industrie ingestort – fd.nl (This is a Dutch article that basically says Dutch manufacturing is getting killed)
Ventes en baisse de 4,9 % pour PSA Peugeot-Citroën – Le Monde (A French article which points to weakness in French auto sales. More subsidies are on the way)
Otra fuerte baja del maíz en Chicago – La Nacion (An Argentine article which points out that corm prices are getting hammered. Take this as an indication of weak commodity prices not only in oil but in Agricultural commodities. That means inflation will come down doubly)