All about Italy and Spain and pressure will be intense

In anticipation of a European agreement by Wednesday, Sarkozy yesterday summed up what they have so far, “work is going well on the banks, and on the fund and the possibilities of using the fund, the options are converging. On the question of Greece, things are moving along. We’re not there yet.” Spoken generalities notwithstanding, we assume some deal will be announced in days. That said, this is all about Italy and Spain and by assisting their refinancing needs over the next few years at the same time major pressure is put on them to get their finances in order. This is from today’s FT front page, “Germany and France have turned on Italy to demand further action to boost growth and reduce its huge debt.” Greek stocks are down 5% led by banks as bank shareholders face the reality of a sharp reduction in the mark to market value of their Greek bonds and the equity dilution that will follow. With respect to French banks and their Greek exposure, ECB member Noyer said that French banks won’t need state help, they can absorb Greek losses but still need to raise about 10b euros of equity. Euro region mfr’g and services composite index fell to 47.2 from 49.1 and was 1.6 pts below expectations. It’s the weakest report since July ’09. Asian stocks rallied after China’s HSBC preliminary Oct mfr’g figure rose to 51.1 from 49.9, the 1st reading above 50 since June and copper is following higher for a 2nd straight day

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