Equities Hammered by Euro Zone And Banking Worries! Stoxx 600 Europe Posts Biggest Two-Day Drop in 2-1/2 Years on Debt Crisis!

• The financial quakes are coming fast and furious. The sovereign debt crisis is about to blow up! On Wednesday, September 6, the German Constitutional Court will past verdict on whether the German federal government has the right to use German taxes to bailout foreign countries. If the verdict is even close to a NO, though unlikely, all hell will break loose and the Eurozone will collapse! See: German Court Set to Trip Up EU?
  –
  Equities hammered by euro zone and banking worries
  LONDON (Reuters)- European stocks tumbled 4 percent on Monday, with banks plumbing a more than two year low, as fears for the future of the euro zone bubbled up against a background of weak economic growth and threats to the banking sector.
  –
  The euro fell across the board, with peripheral euro zone debt concerns and political uncertainty in Germany prompting rises in both the dollar and safe-haven Swiss franc.
  –
  Worries about public deficits in Greece and Italy and a regional election rout for Germany’s ruling party cast fresh doubt on the euro zone’s ability to tackle its debt crisis.
  –
  Wall Street was closed for a holiday but it was unlikely that U.S. investors would have been in any more of a positive mood given data ahead of the long weekend that showed U.S. employment growth halted in August. That fueled concerns that the world’s biggest economy is slipping back into recession.
  ….
  The euro zone, meanwhile, faces a week packed with political and legal risks, beginning with a German constitutional court ruling on Wednesday on claims that Berlin is breaking German law and European treaties by contributing to bailouts for Greece, Ireland and Portugal. The court is not expected to rule against the contributions, but may add stipulations for dealing with future requests that will complicate the region’s bailout plans.
  –
  “People are pricing in the risk of European meltdown, rather than the likely outcome,” said Ian King, head of international equities at Legal & General. Banks in Europe were also under the cosh because of uncertainty about what a U.S. lawsuit connected to the packaging of toxic mortgage debt might mean.
  –
  “Not a great start to the week. There is a lot going on for banks, especially in the light of a low-growth environment and the backdrop in the euro zone not improving,” said Mike Lenhoff, chief strategist at Brewin Dolphin.
  –
  Stoxx 600 Europe Posts Biggest Two-Day Drop in 2-1/2 Years on Debt Crisis
  By Sarah Jones, http://www.bloomberg.com/
  European stocks tumbled, with the Stoxx Europe 600 Index posting its biggest two-day drop since March 2009, as investors speculated that support for bailing out Europe’s indebted nations may fade.
  –
  Deutsche Bank AG (DBK) and Credit Suisse Group AG (CSGN) both tumbled more than 8 percent after the U.S. sued 17 lenders to recoup $196 billion and the cost of insuring against default in Europe surge to a record. Clariant AG (CLN) led chemical makers lower, tumbling 16 percent after the company cut this year’s earnings forecasts.
  –
  The Stoxx Europe 600 Index lost 4.1 percent to 223.45 at the 4:30 p.m. close in London as all 19 industry groups declined. Standard & Poor’s 500 Index futures expiring in September retreated 2 percent. U.S. stock markets are closed today for the Labor Day holiday.
  –
  “Europe is being hammered on the debt crisis,” said Henrik Drusebjerg, senior strategist at Nordea Bank AB in Copenhagen. “It’s Merkel getting slapped at the regional election yesterday and it’s the Finns demanding collateral for the money they’re wiring to Greece.”
  –
  The benchmark Stoxx 600 plunged 2.4 percent on Sept. 2, after a worse-than-forecast U.S. jobs report added to concern that America’s economic recovery is stalling. The gauge lost 10 percent last month amid concern that global economic growth is slowing as Europe’s sovereign-debt crisis spreads.
  –
  German Election
  Merkel’s party yesterday suffered its fifth election loss this year after the Chancellor failed to sway voters in her home state with a campaign based on her handling of the euro area’s debt crisis.
  –
  The Social Democrats, the main opposition party nationally, took 35.7 percent to win yesterday’s election in Mecklenburg-Western Pomerania, while Merkel’s Christian Democratic Union had 23.1 percent, its worst result since voting began in 1990 after reunification that year between West Germany and the former communist East Germany.
  ….
  European Markets Tumble
  National benchmark indexes dropped in all 18 western European markets. Germany’s DAX Index (DAX) tumbled 5.3 percent, sending the gauge’s companies to their cheapest-ever valuation as a multiple of estimated earnings, according to Bloomberg data that began in 2006. The U.K.’s FTSE 100 Index dropped 3.6 percent and France’s CAC 40 Index lost 4.7 percent.
  ….
  European efforts to contain the region’s debt crisis risk unraveling as individual nations’ demands for collateral, Greece’s deteriorating economic predicament and wavering commitment to austerity packages from euro members such as Italy throw any recovery in doubt.

end