Many believed overnight downside action in Futures was based on the "Example of True Austerity", Portugal where the resignation of what could ultimately be an entire party would force elections which would likely not go the Troika's way as I just posted yesterday the IMF admitted its mistake in thinking austerity can produce growth with Greece, it just produced more suffering so the best example of austerity, Portugal has felt the same pain, meaning new elections will likely see a new regime that is anti-austerity and therefore rejects the terms and conditions set out for the bailout package they currently have, meaning we would not have just 1 Greek situation, but two- one from a country that never stuck to any bailout terms and another who rigidly followed them.
Bond Yields in Portugal (10-year) spiked to 7.65%, contrast that with the average aide package loan at 3.2% interest. Spain and Italy also saw contagion with markets underperforming and yields shooting higher, but was this the reason for ES moving down overnight?
Take a look...
The EUR/USD plunging is also being used as an example or proof of the Portuguese situation causing market turmoil.
There's no doubt the market is concerned over Portugal, look at the bond yield spike, but that's the bond market, not ES.
On the other hand in Egypt we have the Military's deadline coming due in hours now, here's some of the overnight developments from Egypt...
"Egypt's military council is currently holding a crisis meeting which was joined by leading opposition figure Mohammed ElBaradei and religious leaders, military sources said on on Wednesday.
But the political wing of Egypt's ruling Muslim Brotherhood refused an invitation to meet the armed forces commander, military and party sources said.
"We do not go to invitations (meetings) with anyone. We have a president and that is it," said Waleed al-Haddad, a senior leader of the Freedom and Justice Party told Reuters.
"We do not go to invitations (meetings) with anyone. We have a president and that is it," said Waleed al-Haddad, a senior leader of the Freedom and Justice Party told Reuters.
The post on the official Facebook page of the Supreme Council of the Armed Forces (SCAF), headed by armed forces chief General Abdel Fattah al-Sisi, said: "We swear to God that we will sacrifice even our blood for Egypt and its people, to defend them against any terrorist, radical or fool."
The statement was issued three hours after Mursi gave a televised address to reject the ultimatum from Sisi.
The president also said he stood ready to “give my life” to defend constitutional legitimacy, echoing comments by a senior leader of the Muslim Brotherhood who urged supporters to be ready to sacrifice their lives to prevent a coup.
In the speech, which continued after more than 40 minutes, he admitted his first year in office had been difficult and he faced challenges from ‘corrupt remnants” of the old regime."
The Army will: Call for new elections, SUSPEND THE NEW CONSTITUTION and DISSOLVE PARLIAMENT
In other words, the army will do exactly what I said last year and yesterday, purge any remnant of the "Democratically elected government, the President, the NEW constitution and any members of the Muslim Brotherhood in Parliament by removing all members because the only non MB members that are left in parliament are those the MB finds tolerable and thus the army does not as it reestablishes its 60 year reign over Egypt.
And the equity/asset proof of this...
The move in Crude since yesterday's close, USO is up over 2 %
So I think that establishes what the market is truly worried about, a fight between the MB and the Egyptian Army won't go well for the MB at first, but if they keep on it, back-up sympathizers will flow across the Sinai and a less conventional conflict will arise. I think the chances of this are very high.
This isn't to say that the market will not be in terror of the European situation soon enough...
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