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Euro crisis deepens, crushing overseas stocks Add to ...

These are stories Report on Business is following Wednesday, Sept. 26, 2012.

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Euro crisis deepens
Troubles in Spain and Greece escalated today, sending European stocks into a tailspin.

In early action, North American markets were far calmer, though down. Gold, oil and the Canadian dollar also slipped.

Tokyo’s Nikkei shed 2 per cent, and Hong Kong’s Hang Seng 0.8 per cent.

In Europe, London’s FTSE 100, Germany’s DAX and the Paris CAC 40 sank, with the region’s banks getting hammered. Spanish stocks plunged by more than 3 per cent and bond yields spiked again. Markets in Italy and Portugal also slumped to the tune of about 3 per cent.

Late yesterday, New York stocks soured after Charles Plosser, chief of the Federal Reserve Bank of Philadelphia, warned that the U.S. central bank’s latest asset-buying stimulus measure, dubbed QE3 to mark the third round of quantitative easing, might not work.

That’s still playing into markets today, but it’s the escalation of the euro debt crisis that’s really wreaking havoc.

“Given how low the Fed's stock sits at present in some parts of the U.S., some might think it can't go much lower, but investors don't like to see the QE rescue plan questioned,” said market analyst Chris Beauchamp of IG in London.

“Added to this we have footage of rioting in Spain, which brings to mind similar images from Greece over the past two years. The prospect that Spain might prove as truculent as  Athens on the subject of reforms is a particularly uncomfortable one, since it risks making the Greek situation look like a mere sideshow. Oh, and the Greeks are on strike again, just to underline this point.”

Greeks called a 24-hour general strike, a day after violent clashes between police and demonstrators in Spain. It took little time for trouble to begin in the streets of Athens.

On top of that, Spain’s central bank warned today of the deepening recession. Unemployment is unbearable in Spain, where one in four people can’t find work and where fully half the youth population is jobless.

Prime Minister Mariano Rajoy’s government is poised to unveil more austerity measures tomorrow, a move that promises to further fan the flames of social unrest.

Catalonia, the largest region in the country, is threatening to secede, speculation is rampant about Madrid’s desire to seek a bailout, and Standard & Poor’s cut its outlook for Spain’s economy.

“In a country that has an unemployment rate of 25% and a contracting economy it was a reminder, if any were needed, that Spain is swimming against the tide as it struggles to meet its obligations, and balance its budget,” said senior analyst Michael Hewson of CMC Markets, referring to the comments by S&P.

“It can only be a matter of time before Spain is forced into a bailout request and it might need an external catalyst to provide it,” he said in a research note today.

“This catalyst could well be in the form of ratings agency Moody’s if they follow through with a downgrade after the completion of its review of the country, which started in June. If it takes a similar view on the dynamics of the Spanish economy as S&P did yesterday then a downgrade could come any day now.”

Just sayin’
“Through the Economic Action Plan, Stephen Harper’s Government is making the necessary investments to protect Canadians and create jobs now, while laying a strong foundation for long-term economic growth. Our low-tax plan is helping businesses create jobs.” Conservative Party statement, April 18, 2011

“The level of caution [among Canadian companies] could be viewed as excessive ... Their job is to put money to work and if they can’t think of what to do with it, they should give it back to their shareholders.” Bank of Canada Governor Mark Carney, Aug. 22, 2012

 “We have lowered taxes on income for businesses and individuals. We have encouraged the purchase of new technologies and equipment. But ultimately, it is up to you in the private sector to take advantage of all these strengths and invest, to create jobs and grow our economy.” Finance Minister Jim Flaherty, yesterday

CAW eyes Chrysler deal
The Canadian Auo Workers union could reach a deal with Chrysler Group LLC as early as today, CAW president Ken Lewenza says.

Mr. Lewenza said he and Chrysler’s chief negotiator Al Iacobelli will have discussions today to “hopefully come to a conclusion," The Globe and Mail's Greg Keenan reports.

He would not say what remains outstanding but sources close to the talks said Chrysler was told by the union to meet the pattern agreement ratified by Ford Motor Co. employees in Canada on Sunday or the union would serve the company with a 24-hour strike notice. General Motors Co. has also struck a deal with the CAW.

Confidence climbs
Forget about the rest of the world. At least we’re happier.

The Conference Board of Canada’s consumer confidence index rose 6.7 points this month, the group said today, with British Columbians leading the way.

“Optimism was higher this month as the balance of opinion improved on all questions, albeit from levels that showed deep concern over the performance of the Canadian economy,” it said.

“Still, the results of the latest survey suggest that consumers are at their most optimistic since July 2011.”

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