EmailThe political turmoil in Europe is far from over. It is a negative for the global financial markets. S&P futures indicate a lower open of about 12 points.
Today's news is that Greek politicians have been unable to agree on a coalition government and that new elections are necessary. That won't solve anything. It just means more time for the financial markets to obsess over Greece's problems. New elections aren't going to end the horrible recession and huge fiscal deficits. The best solution for Greece may be to exit the Euro and take the full dose of medicine right away rather than go through long, slow agony.
The Greek economy in itself isn't large enough to impact the global economy much, but the risk of debt market contagion is real enough to keep financial markets on edge. European stock exchanges are down about 2%.
On top the problems in Greece, the elections in Germany and France reflect a weakening of resolve towards budgetary reform. It is very unclear what direction Europe is going to take, and the US financial markets may be in for a very bumpy ride this summer. The political situation in Europe is deeply troubling.
There are no economic releases today and no earnings reports of note. There is, however, the news that Greece has little on California, which now faces a whopping $16 billion budget deficit. California, unlike Greece, has a requirement to balance the budget (or at least make a plausible effort to do so with creative accounting). The first step, according to California Governor Brown, is to raise taxes. The US President has asked Europe to maintain their commitment to austerity, but we are unaware of any call placed to Governor Brown of California.
There is excellent relative long-term value in stocks, but that is going to be a hard sell if the news out of Europe remains troubling and US economic growth remains fragile. The near-term road looks bumpy.
Founder and Chairman, Briefing.com
