Today’s Greek-inspired rout has spread across to the US, as the Dow Jones and S&P 500 both extended their losing streak into a second day.
Poor US manufacturing data added to the gloom, although the real focus remains the various machinations in Europe.
By 4pm (London time), the Dow Jones was down 2.4% at 11,669.46, while the S&P 500 had fallen 2.75% to 1218.78. In London, the FTSE 100 struggled to hold above the 5400 level, and was off 2.8% at 5388.13.
Eurozone deal starts to crumble
George Papandreou has really set the cat among the pigeons with his decision to press for a Greek referendum. Last week’s Eurozone deal had seemed as solid as the Acropolis, but the fragility of the situation has been exposed by today’s events; to quote Field Marshal Foch, ‘l'edifice commence à craquer’.
Greece has, naturally, taken the spotlight, and the situation has developed further since this morning. Several MPs from the ruling PASOK party have defected, eliminating the wafer-thin majority held by George Papandreou, and prompting other politicians to demand that the government step down and allow early elections.
It is looking increasingly unlikely that Mr Papandreou will survive the week, with a ‘no confidence’ vote expected on Friday. If the government does fall, then this might obviate the need for a referendum, since an election will ensue anyway, and the conservative opposition (which opposes the bailout programmes) may come to power.
Meanwhile, opposition politicians have been active in Italy as well today. Politicians from the opposing Democratic Party called on President Napolitano to force Prime Minister Berlusconi’s resignation and the formation of a new government in advance of this week’s G20 meeting.
Italian ten-year bond yields have pushed back above 6%, despite a raft of bond-buying on the part of the ECB (where new head Mario Draghi has taken office today), reflecting a fresh bout of investor concern about the Italian government.
Later today, the French cabinet will meet, while the Greek cabinet will also hold an emergency meeting.
The latter promises to be interesting given that the finance minister had not even been informed of the decision to hold a referendum and that the health minister has publicly said that no plebiscite should be held.
Coupled with the ructions in Italy, it promises to be an interesting week. Doubtless a few new items have been added to the agenda for this week’s G20 summit.
US manufacturing weakens
Over in the US, there was yet another piece of disappointing economic data. The ISM manufacturing index fell to 50.8 for October, from September’s 51.6. A rise to 52 had been forecast by ‘expert’ economists, but instead the index followed yesterday’s Chicago PMI reading.
Growth was seen in the new orders segment, which moved to expansion from contraction between September and October, but the prices constituent dropped sharply, from 56 to 41.
International growth boosts Pfizer
US drugs giant Pfizer reported earnings today, with profits up thanks to increased international demand. Net income for the third quarter jumped from 11 cents per share a year ago to 48 cents per share, ahead of expectations, while revenues were up 7% at $17.2 billion.
International sales helped to offset the drop in US sales, while Pfizer also lifted its full-year earnings outlook. The shares edged back 0.45% to $19.73, as general risk aversion prompted spread betting investors to sell shares.
G4S runs up the white flag
The deal between British security firm G4S and Danish cleaning company ISS has been called off, after shareholder opposition broke into full-fledged revolt. G4S said that it would suffer £50 million in costs for the abandoned deal, and it will also cancel plans for a rights issue worth £2 billion that had been planned to help cover the costs of the acquisition.
The problem for G4S now is that it must explain how its prospects as a standalone business remain promising. G4S shares rose 0.66% to 245.8p, though they are still way off the level of 285.2p seen before the deal was announced.
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