From UBS floor guy Art Cashin, this sums it up…
The Day Ahead – Here is an email that went out as daylight hit the East River:
Dexia, the Belgian bank alluded to in rumours yesterday now at centre stage. Authorities climbing all over each other with guarantees and assurances. Even some talk of splitting into good bank/bad bank. Trouble here is that this bank was said to have passed the stress test with flying colours.
Market unsettled by new talk that “official” haircuts may be set at 50% vs. prior 21%. Once again, markets unsettled by eroding confidence in financial markets rather than by a single event/entity.
Traders see neither lifeboats or fire engines. What happens if a real crisis breaks out? Is there a plan? So, far looks like rerun of yesterday – worries and wariness rather than panicky selling. DAX -3%. FTSE & CAC -2%.
Unfortunately, markets have weakened further still. The questions raised about the stress test and the bank that it passed may linger through the day.
Consensus – Market very oversold but European regulators look like they don’t see crisis looming. Find Auntie Em and Uncle
Henry. Has potential to be a whacky session. Stay very, very nimble.