While you were sleeping: Euro contingency plans
May 24 (BusinessDesk) - Equities suffered on both sides of the Atlantic as an increasing number of euro zone officials acknowledge preparations are being made for the possibility of a Greek departure from the common currency.
The currency union was formed under the premise that once in, there's no out and a member's exit risks destabilising the trust in the currency and the bloc itself.
Euro-zone officials agreed on Monday that each euro-zone country must prepare an individual contingency plan in the event that Greece decides to leave the single currency bloc, according to Reuters.
The euro dropped as low as US$1.2545, the weakest since July 2010.
A meeting of European leaders in Brussels today is not expected to result in any new measures to stem the crisis.
"A Greek exit would be a Pandora’s box,” Jacques-Pascal Porta, who helps manage US$570 million at Ofi Gestion Privee in Paris, told Bloomberg News. “It’s a disaster that would leave the door open to other disasters. The euro’s credibility will be weakened, and it would set a precedent: Why couldn’t an exit happen for Spain, for Italy, and even for France?”
In Europe, the Stoxx 600 Index ended the session with a 2.1 percent slide for the day. The UK’s FTSE 100 dropped 2.5 percent, Germany’s DAX fell 2.3 percent, while France’s CAC 40 declined 2.6 percent.
Concern about the impact of Europe's ongoing problems weighed on Wall Street, which had disappointments of its own.
In late afternoon trading in New York, the Dow Jones Industrial Average dropped 1.09 percent, the Standard & Poor's 500 Index shed 1.15 percent and the Nasdaq Composite Index fell 1.08 percent. As a sign of investor wariness, shares on Wall Street were paring losses in the final hour of trading.
An 18-percent slump in Dell shares following the computer maker's disappointing forecast for second-quarter revenue hammered both the S&P 500 and shares of rival Hewlett-Packard.
HP, scheduled to report quarterly results after the market close, will post earnings of 91 cents a share, excluding some items, according to the average estimate in a Bloomberg survey. That would be 26 percent less than in the same period last year, the data show.
While the US housing market showed better-than-expected data for the second day in row, it wasn't enough to help today's sentiment. Purchases climbed to a 343,000 annual rate, up 3.3 percent from a revised 332,000 in March, according to the Commerce Department.
The data "adds to the growing sense that housing is stabilising, but it isn't enough to overcome the global issues driving the day," James Dunigan, chief investment officer of PNC Wealth Management in Philadelphia, told Reuters.
Indeed, a report today showed Japan’s exports increased 7.9 percent in April from a year earlier, a gain that fell short of expectations.