Trader Talk

A Global Solution to European Problems?

The euro is stronger, and European stocks are higher as a Group of 20 nations (G20) ministerial meeting in Paris gets underway with much talk of an expanded role for the International Monetary Fund (IMF). A Financial Times story late Thursday said several emerging market countries, including China and Brazil, wanted to contribute to the IMF to buy special bonds or invest directly in sovereign debt.

The time has come to start speaking with one voice, one plan: The G20 ministerial meeting this weekend, the European Union Summit Oct. 23, and the G20 Cannes Summit Nov. 3-4. The leaders are going to attempt to speak with one voice on bank recapitalization, Greek sovereign debt, and tighter fiscal integration.

And remember: the expanded European Financial Stability Facility (EFSF)will be allowed to invest in debt in the primary and secondary markets, and finance bank recapitalization by way of loans to governments.

We knew that: The deputy finance minister of Russia, Sergei Storchak, said the EFSF does not have sufficient funds. That's why there's so much talk of leveraging the EFSF, or having emerging market countries contribute to a special IMF fund.

Treasury Secretary Tim Geithner, in a CNBC interview, noted that the IMF has "very substantial, uncommitted resources" it can direct to the problem.

Bank execs strike back: I noted Thursday that Deutsche Bank CEO Josef Ackermann came out swinging against big haircuts on Greek debt. He said the EU should not force a capital increase down the throat of the banks. Ackermann said the reason we are having troubles is because we own a boatload of European sovereign debt that is worth a lot less because it is no longer risk-free. He said that European governments need to restore trust in state finances.

The European Banking Federation has also come out against recapitalization, saying, "We do not see the proposed recapitalization of European banks as central to the solution."


1. The initial public offering (IPO) drought finally breaks, sort of: Wireless equipment maker Ubiquiti priced its IPO, which should begin trading on the Nasdaq Stock Market today. More than 7 million shares at $15 each, the low end of the expected range of $15 a share to $17 a share. It would be the first IPO in a couple months.

2. China Consumer Price Index, up 6.1 percent in September. That seems high (it is), but it's less than was seen recently — 6.5 percent in July. That's good news, but it's still too high to enable China to loosen its tight monetary policy.

3. Google jumps 8 percent after easily beating estimates ($9.72 a share vs. $8.74 a share consensus). Revenues were much stronger than expected, as ad sales (paid clicks) were very strong.

4. Navistar International shares may rise after Carl Icahn revealed it has purchased a 9.8 percent stake in the truck maker. Filings showed Icahn purchased 7.1 million shares for $118.1 million beginning Aug. 23 through Thursday.

5. Go to work with Wall Street. For the first time, the Occupy Wall Street protestors got attention in the morning when many attempted to walk south on Broadway to march in front of the New York Stock Exchange (NYSE). Police prevented them from getting in front of the NYSE, but there was a somewhat surreal scene where those protestors turning around and marching north passed the Wall Street working stiffs going south (to the NYSE and other locations). Police were asking for IDs for anyone wanting to walk down Wall Street.

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