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Sarkozy and Merkel Get Religion

European stocks are up, the euro is ripping, up 1.9 percent, as is copper.

The meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel over the weekend produced a vague consensus: Sarkozy has agreed that the old July 21 agreement is no longer workable and that Greek debtholders will have to take a larger haircut than the 21 percent reduction that was originally proposed (which will hurt French banks and may require some direct recapitalization from France). Merkel seems to be bending on using the European Financial Stability Facility (EFSF)to at least partially recapitalize banks.

Cynics of course note that this is short on details (it is), but they are groping toward a consensus that will certainly be agreed upon before the Group of 20 nations (G20) meeting in the beginning of November.

Next up: when's the money coming? The Greeks have wrapped up their negotiations with the troika (International Monetary Fund /European Central Bank/European Union), and will hopefully issue a statement in the next day or so about when the next 8 billion euro ($12.5 billion) payment will be forthcoming.

Also helping: more stable U.S. economic numbers. Last week we saw better-than-expected service sector, September same-store sales, and nonfarm payrolls, all of which have reduced the likelihood of a recession.

Elsewhere:

1. The EFSF expansion is on the verge of becoming reality, but not without some nail-biting. Slovakia is scheduled to vote tomorrow, and the vote is likely to be close. If it fails, there is already talk of a second vote to take place on Friday. Malta and Slovakia are the only remaining of the 17-nation euro zone countries that have not approved the EFSF expansion.

2. Um, on second thought — let’s not do that! Netflix shares jump 10 percent after it abandoned plans to separate its DVD mail service from its online streaming business. Responding to customers’ fury, the company reversed course and will now continue to operate both businesses under the Netflix brand, allowing customers to use keep their single account for both features.

3. Dropping their (stock) calls: Sprint Nextel shares remain under pressure, falling 2 percent following a number of downgrades over heightened concerns on its strategy and financial stability after the wireless carrier on Friday revealed it will need to raise more capital to fund capital expenditures. The stock was cut to "hold" at Deutsche Bank, Collins Stewart, and Kaufman Brothers and to "neutral" at JPMorgan.

4. So much for the "disappointing" iPhone announcement: In the first 24 hours of sales, Apple has sold 1 million pre-orders of its iPhone 4S — shattering the iPhone 4’s previous record of 600,000 on its first day of pre-orders. _____________________________
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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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