European Debt Crisis Impacts Wall Street

Rumors that Greece is likely to default on its enormous debt caused ripples of apprehension around the financial world, resulting in investors selling off stocks, and US markets dropping sharply on Friday. Speculation is rife that the country may very well not get the next installment of bailout funds allocated by the European Union, the European Central Bank and the International Monetary Fund – at least until the so-called troika is assured that austerity measures in Greece are going to achieve what they have set out to do, reduce the government’s debt. All seventeen nations using the euro as currency – the Eurozone – need to approve of further bailout funds being issued to Greece. While all eyes are on Greece at present, Portugal, Ireland, Spain and Italy are also struggling, and analysts have expressed doubts that the European Financial Stability Facility (EFSF) will be able to pull all these ailing economies through the current financial crisis.

With the Federal Reserve due to meet on 20 September, investors will be examining the Consumer Price Index (CPI) from the Commerce Department on Thursday. As the economy’s primary inflation gauge, the CPI will reveal whether the US economy is showing signs of deflation, in which case the Fed may launch QE3 – a third round of quantitative easing. Friday saw the Dow declining more than 2 percent, with Nasdaq dropping 0.5 percent and the S&P slipping 1.7 percent. Markets are expected to remain volatile in the weeks ahead.

Of interest to investors on Monday will be Bank of America CEO Brian Moynihan’s presentation at the Barclays investor’s conference being held in New York. Tuesday includes quarterly earnings from Best Buy (NYSE:BBY) and statistics on August’s import and export prices. The Commerce Department will be releasing its Producer Price Index (PPI) and core PPI on Wednesday, as well as a report on retail sales for August. The July reading on business inventories is also due on Wednesday.

The CPI, Empire Manufacturing survey and weekly report on claims for jobless benefits are all due on Thursday. Also due on Thursday, but after markets close, is the earnings report from Research in Motion, the makers of BlackBerry. Friday sees the release of the consumer sentiment reading from the University of Michigan.