GO
Loading...

Is Perfect Financial Storm Brewing Overseas?

Tuesday, 4 May 2010 | 5:48 PM ET

Investors went running for the exits on Tuesday with some analysts worried that we may be looking at the perfect financial storm.

Storm #1: Europe

As you may know, part of the bearish sentiment stemmed from a market rumor suggesting Spain might soon follow Greece and ask the EU for a massive bailout – to the tune of for 280 billion euros.

Spanish Prime Minister Jose Luis Rodriguez Zapatero denied the claims calling the chatter "complete madness."

Nonetheless, investors dumped stocks worried that problems in Europe were far from solved; the euro tumbled to a one-year low against the dollar.

Storm #2: China

But, as you may not know,partof the bearish sentiment in the market also stemmed from Beijing’s decision to raise banks' reserve requirements to fend off inflation. It’s the third such increase in China this year.

“All sectors (in China) are under pressure," says Zheng Weigang, analyst at Shanghai Securities with bank and real estate stocks leading the plunge.

As a result the Shanghai Composite, China's key stock index, fell 1.2% on Tuesday to its lowest close in seven months.

What does it all mean?

If you watch Fast Money regularly, you may remember that Miller Tabak strategist Peter Bookvar has expressed concerns that investors can’t withstand a one, two punch from both China and Europe.

Investors didn’t want to buy umbrellas despite the gathering storm clouds, he says.

A lot of US investors think it’s all about the US and everything else can take care of itself but in a globalized world that’s not the case, Boockvar adds.

Europe is China’s biggest trading partner and internally China is trying to slow down. China’s slower growth impacts Taiwan, Singapore and South Korea. They export to China who then exports to Europe. We’re all in this together.

What do you think? We want to know!

What’s the trade?

I’d look at a long position gold , counsels Joe Terranova.

I think there’s still time to short US companies that are exposed to Europe or China, says Brian Kelly.

The following list was compiled by S&P and shows the top 5 US firms with sales generated in Europe between 2003 – 2008.

These may be the companies that could feel the most pain next earnings season, reminds Fast Money host Melissa Lee, due to the weaker euro.

Company *% Sales From
**Schering-Plough 48%
Flowserve 47%
Paccar 47%
Owens-Illinois 44%
Pall Corp 43%
Source: S&P
*Sales between 2003-2008
** Schering-Plough was acquired by Merck

U.S. Market Can't Take China
The deadly double dose of Europe and China slowing economies at the same time, with Peter Boockvar, Miller Tabak equity strategist.


______________________________________________________
Got something to to say? Send us an e-mail at fastmoney-web@cnbc.com and your comment might be posted on the Rapid Recap. If you'd prefer to make a comment but not have it published on our website send those e-mails to fastmoney@cnbc.com.

Trader disclosure: On May 4, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Najarian Owns (PFE); Najarian Owns (GS) Calls; Najarian Owns (MS); Najarian Owns (C) Calls; Najarian Owns (SFD) Calls; Najarian Owns (TEVA); Adami Owns (AGU), (C), (INTC), (GS), (NUE), (MSFT), (BTU); Finerman's Firm Is Short (IYR), (IJR), (MDY), (SPY), (USO); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (AEO), (ARM); Finerman Owns (BAC), (BAC) Preferred; Finerman's Firm Owns (BAC), (BAC) Calls; Finerman's Firm And Finerman Own (CVS); Finerman's Firm And Finerman Own (JPM); Finerman's Firm And Finerman Own (RIG), (RIG) Calls; Finerman's Firm Owns (WFC) Preferred; Terranova Owns (PFE), (SWN), (XCO), (TER); Terranova Owns (C) May Calls; Terranova Is Long Gold June 2010 Futures; Terranova Is Short (CMA); Edwards Owns (VXX); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Cortes Is Long Treasuries; Cortes Is Long U.S. Dollar; Nations Owns (SPY)

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Whitney Tilson
Funds Managed By Whitney Tilson Own (BUD)
Funds Managed By Whitney Tilson Own (BRK.A)
Funds Managed By Whitney Tilson Own (BRK.B)
Funds Managed By Whitney Tilson Own (MSFT)
Goldman Sachs Is A Prime Broker For Funds Managed By Whitney Tilson

For Anthony Scaramucci
Scaramucci Owns (WMT), Skybridge Owns (WMT)
Scaramucci Owns (PFE), Skybridge Owns (PFE)
Scaramucci Owns (MRK), Skybridge Owns (MRK)
Scaramucci Owns (GS), Skybridge Owns (GS)
Scaramucci Owns (MS), Skybridge Owns (MS)
Scaramucci Owns (JPM), Skybridge Owns (JPM)

For Patty Edwards
Edwards Owns (SPY) For Clients
Edwards Owns (QQQQ) For Clients
Edwards Owns (WMT) For Clients
Edwards Owns (PFE) For Clients
Edwards Owns (MRK) For Clients
Edwards Owns (BMY) For Clients
Edwards Owns (AAPL) For Clients
Edwards Owns (MS) For Clients
Edwards Owns (JPM) For Clients
Edwards Owns (BAC) For Clients
Edwards Owns (C) For Clients
Edwards Owns (WFC) For Clients
Edwards Owns (EEM) For Clients
Edwards Owns (GLD) For Clients
Edwards Owns (PGM) For Clients

For Brian Kelly
Kanudrum Capital Is Long U.S. Dollar
Kanudrum Capital Owns (TLT)
Kanudrum Capital Owns (GLD)
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Short (DE)
Kanundrum Capital Is Short (NUE)
Kanundrum Capital Is Short (FDX)
Kanundrum Capital Is Short (XOM)
Kanundrum Capital Is Short (HES)
Kanundrum Capital Is Short (IBM)
Kanudrum Capital Is Short Euro
Kanudrum Capital Is Short British Pound
Kanudrum Capital Is Short Yen
Kanudrum Capital Is Short Swiss Franc



CNBC.com with wires

Featured

Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

  • Scott Wapner is host of the "Fast Money Halftime Report," which airs weekdays from 12 p.m. to 1 p.m. ET.

  • Guy Adami is a contributor on CNBC's "Fast Money." He also is managing director of stockMONSTER.com.

  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

Halftime Report