Thursday, August 4, 2011

How You Like Me Dow?

Dow Jones closed down 512 points today as the Greek Fire finally burned all the way through Italy's bond market, setting off a massive chain reaction thank pretty much sank everyone.

Bond yields – interest rates – in Italy remained stuck above the critical level of 6% while Italian shares plunged amid confusion about the moves in the main stock market index which was experiencing pricing difficulties.

Amid the rout, it emerged that police acting on orders from the prosecutors of Trani, a port on Italy's Adriatic coast, had raided the Milan offices of the rating agencies, Moody's and Standard & Poor's, as part of continuing investigations into their role in recent financial turmoil. The chief prosecutor in Trani told Reuters his office was checking to see whether the ratings agencies "respect regulations".

The Italian stock market blew up, which blew up the entire Eurozone, which blew up the Dow and US markets.  The culprit?  "Technical issues" with the Borsa Italiana and the NYSE Euronext exchanges, which were hit by "glitches".

At NYSE Euronext, an afternoon outage on its derivatives arm Liffe lasted for more than an hour, which hit instruments such as Euribor, Eurodollar, and some FTSE index futures. Prices on the Paris, Amsterdam, Brussels and Lisbon equity markets were also affected. The group said trading on its derivatives platform resumed for a 20-minute period to finish at 5.30pm, after the close of Europe’s main cash equities markets.

Borsa Italiana, owned by the London Stock Exchange, suspended its MIB 30 index 30 minutes before the close but the Milan bourse did not give a reason. Although owned by the LSE, it uses a different trading platform to London. The bourse also temporarily suspended several of Italy’s largest companies because of the high volatility, including UniCredit, Fiat, Pirelli and Mediolanum.

Some multilateral trading facilities – alternative trading venues – including BATS Europe and Chi-X Europe took Italy market data out of their feeds.

That pretty much melted down everyone else as everyone realized these weren't glitches, but Italy's market burning a hole through the containment vessel.  Oh, and short term interest rates went negative there for a bit.  Asia opens in a couple hours.  Should be lots of fun.

Remember, Orange Julius got 98% of what he wanted.


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