– Much of the United States may be frying in near-record temperatures but Wall Street has been feeling the heat for months. Wrangling over the debt ceiling has kept markets on edge, and investors are still waiting for a breakthrough that leads to a deal to avoid a devastating default.
Investors have viewed as extremely unlikely the possibility of a U.S. default if the federal government does not agree to raise the debt ceiling. But the odds are growing, and Congress and the White House remained at odds just a few hours before Asian markets opened on Monday.
“Unless during the course of the day there is a specific, concrete proposal that placates the market before Asian markets open, the worst-case scenario is that the markets just sell off — sell off dramatically,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.
White House officials and Republican leaders scrambled on Sunday to reassure global markets the United States would avert a debt default, but the two sides gave no sign they were moving closer to a deal.
White House Chief of Staff Bill Daley warned that there would be a “few stressful days” ahead for financial markets, with the deadline to lift the $14.3 trillion U.S.
– Allowing the EFSF bailout mechanism to buy back bonds from the secondary market would help deal with Europe’s debt crisis, European Central Bank Executive Board member Lorenzo Bini Smaghi told a Greek newspaper.
Euro zone policymakers are exploring ways to extend a rescue deal for overborrowed Greece and give it more time to repair its public finances. At the same time, authorities are trying to prevent the debt crisis from escalating in the bloc’s periphery.
One option being looked at is enabling the European Financial Stability Facility to provide funds for buying back bonds from private investors, a move that could help the country lighten its debt load.
“We have said that a useful option would be for the temporary EFSF mechanism to buy bonds in the secondary market. This option, however, is not included in the design of the EFSF. If there was a way to change this, it would be useful,” Bini Smaghi told Sunday’s To Vima newspaper in an interview.
“This would allow the private sector to sell bonds at market prices, which are currently below nominal value.
– France offered a radical solution Monday for banks to roll over some Greek debt for 30 years as the Greek government fought for political support of its five-year austerity plan to avert bankruptcy.
With depositors fleeing Greek banks in growing numbers and financial markets watching anxiously, President Nicolas Sarkozy told a news conference in Paris that French banks had reached a draft agreement with the authorities on a voluntary rollover of maturing bonds.
“We concluded that by stretching out the loans over 30 years, putting at the level of European loans, plus a premium indexed to future Greek growth, that would be a system that each country could find attractive,” he said.
The plan was put to a meeting of international bankers and European Union officials with the International Institute of Finance in Rome Monday but no decision was taken, an Italian Treasury official said.
In a sign of ebbing confidence that Greece can avoid default on its 340 billion euro debt mountain, Moody’s said Greek banks had lost about 8 percent of private sector deposits so far this year as customers burned their savings due to unemployment, transferred funds abroad or bought gold.
French government sources said under an outline deal, banks would reinvest 70 percent of the proceeds when Greek bonds fall due in 2011-14 and cash out the rest.
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NEW YORK—Stocks fell Monday as investors worried that the $112.61 billion Irish bailout wouldn’t be enough to contain the euro-zone debt crisis.
The Dow Jones Industrial Average closed down 39.51 points, or 0.36%, to 11052.49. The measure’s technology components were among its worst performers, with Hewlett-Packard down 60 cents, or 1.4%, to $42.60, after Gartner Inc. cut its forecast for world-wide personal-computer shipments for the year. International Business Machines fell 1.01, or 0.7%, to 142.89.
The Nasdaq Composite fell 9.34, or 0.37%, to 2525.22, and the Standard & Poor’s 500 declined 1.64, or 0.14%, to 1187.76. The consumer-discretionary and technology sectors suffered the biggest declines, but the financial, energy and materials sectors ended the day in the black following a late-day rebound.
The turnaround came after the Dow had been down more than 160 points earlier in the session, as investors began realizing that at those levels, “there is some value out there,” said Anthony Conroy, head trader for equities at BNY ConvergEx. A