Trader Talk

How to Recapitalize Europe's Banks?

U.S. stock opened higher as September nonfarm payrolls, at 103,000, were notably better than expectations of 60,000. July and August were also revised up significantly: instead of zero jobs growth in August, there was 57,000. The unemployment rate remained at 9.1 percent.

How to recapitalize banks? France worries about its sovereign credit rating. It was bound to happen: Now that Europe is getting on the same page about the need to recapitalize banks, the debate has focused on the mechanism for recapitalization.

Yesterday, German Chancellor Angela Merkel made it clear what the line for recapitalization looked like in her eyes: private sources first, national governments second, and the enlarged European Financial Stability Facility (EFSF) last.

France, however, is worried about its triple-A credit rating, and appears to be pushing to use the EFSF first.

The European Union Summit: Is a Grand Plan coming? This will be resolved by the EU, where international policy makers are clearly hopeful some sort of Grand Plan will be rolled out at the EU Summit meeting on Oct. 17-18. The main hope: the 17 countries will speak on the eurodebt issues with one voice.

If that doesn't happen, international policymakers will ratchet up the pressure. They'll do that at the Group of 20 nations (G20) meeting Nov. 3-4. The International Monetary Fund has got religion on this recently, as has President Obama, who yesterday said he he wanted to see a "concrete" plan for resolving the crisis — when the G20 nations meet.

EFSF 2.0 almost done. Next up: EFSF 3.0. Meantime, 15 of 17 countries have approved the EFSF expansion (EFSF 2.0). We need only Malta on October 10 and Slovakia on Oct. 11.

Many are already saying EFSF 3.0 is coming. What's that? More teeth for the EFSF. The EU Commission is already discussing "stability bonds" that would likely include capital guarantees. The EU Council is meeting Dec. 9. You will hear more about this shortly.


1. Casino company Wynn Resorts rises 1 percent after being upgraded to "outperform" at Credit Suisse on a "compelling" valuation.

Meanwhile, a number of casino stocks including Wynn Resorts, MGM Resorts, and Las Vegas Sands have had a rough-going recently on concerns over their exposure to China. However, Sanford Bernstein looks to calm those fears saying that although the China economy will be pressured, it is unlikely that growth at Macau casinos will slow in 2012, making those three stocks very attractive. ?

2. Dollar Tree announced a $1.5 billion stock buyback program, worth about 16 percent of its current market cap.?

3. Gannett Chairman and CEO Craig Dubow announced his resignation from the media company due to health reasons. Board member Marjorie Magner will become non-executive chairman, while Gracia Martore, the company’s former COO, will become Gannett’s CEO.

4. ConocoPhillips’ Chairman and CEO will retire upon the completion of the company’s forthcoming split. Ryan Lance, currently senior vice president of international exploration and production, will become CEO of the upstream firm, while Greg Garland, senior vice president of Americas exploration and production, will lead the downstream company. _____________________________
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