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Euro Markets Called Sharply Lower After Asia Sell-Off

Published: June 4, 2012 | 7:56 am
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European markets are expected to open sharply lower on Monday following heavy losses for stocks in Asia overnight and on Wall Street following Friday’s far worse-than-expected jobs data.

With the UK market closed for a national holiday, the DAX [.GDAXI Loading... () ] in Germany is called lower by 109 points, according to spread better IG Index, with similar losses expected on France’s CAC [.FCHI Loading... () ], which is seen down 50 at the open.

It was a very busy weekend of news, with billionaire investor George Soros warning that only three months remain to save the euro and claiming that Germany and the European Central Bank will not act in time to do so.

The Financial Times reported that Cyprus will be the fourth nation to seek a bailout from the EU and International Monetary Fund. The head of the small EU member’s central bank told the newspaper that the need to recapitalize Cyprus Popular Bank by the end of June could require Greece’s neighbor to ask for help.

Conflicting reports on Spain will add to the uncertainty going into the first trading session of the week. Spanish Prime Minister Mariano Rajoy called for greater euro zone fiscal integration in a speech over the weekend. His comments came as Der Spiegel, the German magazine, reported that Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble are urging Spain to take money from the European Financial Stability Facility rescue fund in order to recapitalize its banks. Spain immediately denied the story.

It does though appear, however, that Merkel is ready to consider greater integration that could ultimately lead to a fiscal union. The Reuters news agency is reporting Merkel is ready to consider further fiscal union, with conditions.

These include a central authority to manage euro zone finances, major new powers for the European Commission, and a coordinated reform of labor markets, social security and tax policies. If true, the report indicates the price Europe will have to pay for German support for euro zone-backed Eurobonds and fiscal transfer.


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