The price of regulation. From financial regulatory reform to a ban on naked short selling in some German stocks, the markets are reacting to the prospects of more regulation, lower growth, less risk, and a higher cost of capital.
- You can see it in the weakness in the euro, where the prospects for lower growth due to austerity has now become intertwined with talk of a transaction tax and a ban on naked short selling in big German financial stocks.
Currencies: The euro-yen is approaching the lowest levels since 2002; the euro-dollar is at the lowest levels since 2006.
- You can see it in international banks like Nomura and Royal Bank of Scotland and ING, down 2 to 3 percent.
- You can see it in the big high beta stocks associated with the risk trade: commodity stocks, tech stocks, consumer discretionary were the market leaders on the downside.
- You can see it in Visa and Mastercard, both down nearly 20 percent (!) in the past few weeks, and down again today amid concerns on a proposed law to curb debit card fees.
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