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If we can describe the mood on Wall Street with a song, perhaps it would be great Imagine. Refrain in the markets today is: “Imagine a euro zone without Greece. It’s easy if you try. ”
Investors are worried about Europe and indeed should be, but the markets seem to be prepared to react to events in Greece in the same way as it reacted to the collapse of Leman Brothers in 2008, writes CNN.
Shares retreated from this year reached new heights, though so far not yet seen panic sales.
However, the same happened last year. Investors were optimistic in early 2011, when it seemed suddenly realized that the woes of Europe will not be solved overnight.
Many experts believe that the eventual exit of Greece in the euro area is already calculated into the price of shares, bonds and currencies, and the return of the coin will be seen as tantamount to the bankruptcy of Lehman event, especially since it is simulated from an escalating crisis Greece in 2010
“Whether it is an event like Lehman? Banks and markets are preparing for this for years,” said John Cannon, an investment strategist at LPL Financial. In his words, the global economy and markets are much more prepared for such an event than they were 4-5 years ago.
Judging by the behavior of General Electric (GE), this might be true. The company sends signals to investors that it was not too worried about a possible market failure after Wednesday announced that GE Capital will resume paying a dividend to the parent. As a result, GE shares rose more than 4%, which means that either company made a huge mistake, or Europe is not just Lehman.
But what would happen if Greece actually leave the eurozone and this led to an escalation of the crisis in other troubled countries on Europe’s periphery? And I’ll show you in this case a domino effect that after Lehman overturn Washington Mutual, Wachovia, Wells Fargo, AIG, Fannie Mae and Freddie Mac and many others?
Some experts believe that the problems of Greece can be isolated and not lead to problems in Italy, Spain and Portugal, linked to the next victims of the debt crisis.
“Markets should not expect Greece to withdraw the question is when this will happen,” said Sharon Stark of Sterne Agee.
“Yes, going to Greece in the euro area will lead to an initial shock, but Spain and Italy are important for currency bloc and the world economy so that they will receive widespread support, including from the European Central Bank (ECB),” said Stark .
According to her leaving for Greece in the euro area may rather be compared with the decision of the S & P to drop credit ratings of the U.S.. Although it was painfully clear that the United States do not deserve a premium rating, its shares fell on the first day of trading after the agency’s decision, but the sales were short lived.
Other analysts do not believe that “divorce” of Greece to the euro is that simple equation.
“In the worst case scenario” contagion “will spread to Italy and Spain. The cost of debt of both countries will become prohibitively expensive for them to be saved, “said Dr. Robert Shapiro of Sonceon.
Shapiro, who was adviser of Commerce President Bill Clinton, says that is not yet clear what the exposures of large banks in Europe. According to him, many will be surprised and will be forced to suffer huge losses.
Analysts believe it is likely that the fate of Greece cannot be solved and the next elections will be held on 17 June. Many economists warn that markets in the coming weeks will be extremely unstable and will move from speculation.
Despite the events in Greece would be a mistake to assume that Europe is not important. The collapse of the euro area is still a myth, but the economy of Europe will surely undergo many months if not years, filled with pain, which may harm the United States.