Eurozone's lending deal may provide boost to US stocks
Source: Agencies |
June 11, 2012, Monday
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Print Edition
Print Edition
US stocks may get a lift today after eurozone finance ministers agreed to lend Spain 100 billion euros (US$125 billion) to help its battered banks.
The surprisingly large amount of aid removes a huge cloud that has been hanging over financial markets, with investors fearing that a banking crisis in the eurozone's fourth-largest economy could have compounded the currency bloc's troubles with Greece.
Though the exact amount to be lent will be decided in just over a week, striking a deal now means Spain has added support in case Greece's elections on Sunday throw financial markets into a tailspin.
"This is a major step in avoiding a contagion," said Tim Speiss, partner-in-charge of EisnerAmper's Personal Wealth Advisors Group in New York.
"The amount is pretty high, higher-than-expected. Although we need to get more details, at least for equity markets in the US and around the world, this definitely eases short-term fears," Speiss said.
US stocks are coming off their best week of 2012, in large part due to expectations that something would be done for Spain's banks.
After a 2-1/2-hour conference call of the 17 finance ministers, which several sources described as heated, the eurogroup and Madrid said the amount of the bailout would be large to banish any doubts.
For Wall Street, anything that diminishes fears over Europe is welcome news. The broad S&P 500 index fell 6.3 percent in May, its largest percentage drop since September, as the eurozone debt crisis worsened in the wake of Greek elections that produced a hung parliament.
In the first Greek poll, a large number of voters voted for parties opposed to the country's international bailout. The re-run of the elections on Sunday could decide whether the country stays in the eurozone.
"It's good the news of the aid come ahead of the Greek elections. There has already been a lot of volatility in the market associated with it (the elections), so it's a good way to calm the sentiment until we get the elections out of the way," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
The surprisingly large amount of aid removes a huge cloud that has been hanging over financial markets, with investors fearing that a banking crisis in the eurozone's fourth-largest economy could have compounded the currency bloc's troubles with Greece.
Though the exact amount to be lent will be decided in just over a week, striking a deal now means Spain has added support in case Greece's elections on Sunday throw financial markets into a tailspin.
"This is a major step in avoiding a contagion," said Tim Speiss, partner-in-charge of EisnerAmper's Personal Wealth Advisors Group in New York.
"The amount is pretty high, higher-than-expected. Although we need to get more details, at least for equity markets in the US and around the world, this definitely eases short-term fears," Speiss said.
US stocks are coming off their best week of 2012, in large part due to expectations that something would be done for Spain's banks.
After a 2-1/2-hour conference call of the 17 finance ministers, which several sources described as heated, the eurogroup and Madrid said the amount of the bailout would be large to banish any doubts.
For Wall Street, anything that diminishes fears over Europe is welcome news. The broad S&P 500 index fell 6.3 percent in May, its largest percentage drop since September, as the eurozone debt crisis worsened in the wake of Greek elections that produced a hung parliament.
In the first Greek poll, a large number of voters voted for parties opposed to the country's international bailout. The re-run of the elections on Sunday could decide whether the country stays in the eurozone.
"It's good the news of the aid come ahead of the Greek elections. There has already been a lot of volatility in the market associated with it (the elections), so it's a good way to calm the sentiment until we get the elections out of the way," said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
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