Playing Chicken with the World Economy

Stock futures have actually rebounded a bit, as European markets react to the possibility of U.S. default.  It appears that traders are fairly confident that there will be an eleventh hour deal to avoid a U.S. default, with John Boehner and Harry Reid both working on separate short-term debt ceiling solutions.  August 2nd is the deadline, so we still have some time, but time is running out.

The other economic news on the international front is the Moody’s downgrade of Greece to Ca.  S&P and Fitch already have dropped their ratings on Greek debt, and with the recent EU bailout, Greece is basically in default, with Moody’s now saying their is virtually 100% certainty that they will default on their sovereign debt.  They also stated that this sets a bad precedent for the other troubled countries – namely Portugal and Ireland, showing these countries that they can access capital even when they exhibit horrendous fiscal irresponsibility.

U.S. Stock futures have rebounded from their lows, and are not down about 90 to 100 points for the S&P 500.  We will have to watch the first hour or so of trading to see how traders and investors react to the news of the failure of Congress to reach an agreement on the debt ceiling and on Greece.  So far we are not seeing wide spread panic, but many probably have not heard this news as of yet, so we may be in for a roller coaster ride today and this week.

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