Tag Archives: European banks

Is that Desperation Hanging Over Europe’s Banking System? by Don Quinones

Posted on February 26, 2017 | 1 comment

It’s impossible to say whether the European banking system will be the first, second, or third dominoe to fall, but it will definitely be one of the falling dominoes when the massively over-indebted world financial system goes. From Don Quinjones at wolfstreet.com:

Many of Europe’s and America’s biggest banks have begun begging, cap in hand, for a new, innovative way of raising vast sums of dirt-cheap debt on Europe’s financial markets.

The Association for Financial Markets in Europe (AFMA), an organization that prides itself on serving as “the voice of Europe’s wholesale financial markets,” just sent a strongly worded letter to the European Central Bank, urging for the prompt creation of EU-wide regulation allowing banks to sell a newfangled class of bail-in-able debt called “senior non-preferred bonds.”

“A swift agreement is essential to enable banks to continue increasing their loss-absorbing cushions and improve their resolution capacity,” says the letter (translated from Spanish).

In its own words, the AFMA represents “leading global and European banks and other significant capital market players.” Its board includes representatives of the biggest banks, from US megabanks like Citi, Goldman, JP Morgan Chase, Morgan Stanley, Bank of America Merrill Lynch and BNY Mellon to European behemoths like Deutsche Bank, HSBC, Lloyds TSB, Barclays, Unicredit, ING, BNP Paribas, Credit Agrcole, Crédit Agircole, and Credit Suisse.

Many of these banks and a few others not directly represented on AFMA’s board (such as Spain’s Santander) are facing heightened regulatory pressure, both at the regional and global level, to issue increasingly more bail-in-able debt so as to ensure that the next time a banking disaster strikes, part or all of the debt can be used to “bail in” those investors before taxpayers are called upon to cough up the rest.

It’s the way it should have been from the very inception of this global banking crisis. Instead, governments and central banks have injected trillions of dollars, euros, pounds, yen, and yuan of public funds into banks to keep the banks upright and make most bondholders whole, including those holding subordinated, or junior, debt, which is theoretically designed to bear losses in times of stress.

To continue reading: Is that Desperation Hanging Over Europe’s Banking System?

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Biggest EU Banks Embark on the Mother of All Debt Binges, by Don Quijones

Posted on February 14, 2017 | Leave a comment

European banks need to raise capital, so they are issuing a brand new type of debt: senior non-preferred bonds. They are considered capital, have “senior” in the name so they pay a lower interest, but can be “bailed in.” In other words, if the bank runs into trouble, this class of creditors will have made an involuntary and probably unrecoverable contribution to the bank. This will not end well. From Don Quijones at wolfstreet.com:

Spain’s three biggest banks, Banco Santander, BBVA and Caixa Bank, have got off to a flying start this year having issued €8.6 billion in new debt, seven times the amount they sold during the same period of last year. The last time they rolled out so much debt so quickly was in 2007, the year that Spain’s spectacular real estate bubble reached its climactic peak.

Santander accounts for well over half of the new debt issued, with €5.12 billion of senior bonds, subordinate bonds, and a newfangled class of bail-in-able debt with the name of “senior non-preferred bonds” (A.K.A. senior junior, senior subordinated or Tier 3) that we covered in some detail just before Christmas.

Investors beware…

This newfangled class of bail-in-able debt was cooked up last year by French-based financial engineers in order to help France’s four global systemically important banks (BNP Paribas, Crédit Agricole, Groupe BPCE and Société Générale) out of a serious quandary: how to satisfy pending European and global regulations demanding much larger capital and debt buffers without having to pay investors costly returns on the billions of euros of funds they lend them to do so.

That’s what makes senior non-preferred debt so ingenious: it pretends to be simultaneously one thing (senior), in order to keep the yield (and the cost for the bank) down, and another (junior) in order to qualify as bail-in-able. What it amounts to is a perfect scam for big banks to bamboozle bondholders – usually institutional investors like our beaten-down pension funds – into buying something with other people’s money that doesn’t yield nearly enough to compensate them for the risks they’re taking.

To continue reading: Biggest EU Banks Embark on the Mother of All Debt Binges

 

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Reek of Desperation Surrounds EU Banks, Regulators Prepare for “Derivatives Clearing Crisis”, by Don Quijones

Posted on October 10, 2016 | Leave a comment

It is not a question of if the European banking system implodes, it is a question of when. From Don Quijones at wolfstreet.com:

Zombification of EU banking system gathers momentum.

The past week’s events in Europe were dominated by the pound sterling’s spectacular flash crash to its lowest point in 31 years. As is often the case with flash crashes, we will probably never know what exactly triggered the currency to free-fall by 6% during Asian trading hours, though the most cited cause, apart from a “fat finger,” is the gathering realization that a so-called “hard” Brexit is a very real possibility.

But it’s an eventuality that can be expected to play out in roughly two and a half years’ time, at the earliest, and in light of the powerful forces arrayed against it, it may never occur at all.

In the meantime, something far more dangerous is happening on the other side of the English Channel: the slow-motion meltdown of the Eurozone’s banking system.

In its Global Financial Stability Report, the IMF warned that banks in Europe were too weak to generate sustainable profits even if — and here’s the kicker — the region saw strong economic growth. That hasn’t happened for years.

The IMF also cautioned that the banks’ weak profitability, caused by subdued growth in the Eurozone and ultra low or negative interest rates — something the ECB vehemently denies, preferring to blame the crisis on Europe’s smaller regional or local banks — could further erode their financial buffers and undermine their ability to support economic recovery.

“In Europe, about one third of the system – representing some $7.5 trillion euros in assets – remains weak and unable to generate sustainable profits,” said IMF economist Peter Dattels as he presented the report in Washington. As such, European banks need “urgent and comprehensive action” to address a legacy of non-performing loans and bloated, inefficient business models, he said.

“Urgent” and “comprehensive” are two words you’d rarely associate with the Eurozone, especially at a time when the region faces a relentless gauntlet of political threats, from the rise of “populist” movements in central and northern Europe to December’s do-or-die constitutional referendum in Italy. That’s not to mention what promises to be tightly fought national elections in the Eurozone’s two biggest economies, France and Germany, scheduled to be held respectively in April and October, 2017.

The last thing either Merkel or Hollande needs during election season is a region-wide banking crisis, which is why every effort will be made to keep a lid on the problem until the votes have been cast. But that is not going to be easy, not with Germany’s flagship lender, Deutsche Bank, continuing to sink at an alarming rate.

Things have got so desperate for the Frankfurt-based bank that it may soon be in need of corporate charity. According to a rumor unleashed on Thursday by the German daily Handelsblatt, the chief executives of several German blue-chip companies have discussed Deutsche’s problems and are — if needed — ready to offer a capital injection to shore up the bank.

To continue reading: Reek of Desperation Surrounds EU Banks, Regulators Prepare for “Derivatives Clearing Crisis”

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EU Banking Mayhem, One Bank at a Time, then All at Once, by Wolf Richter

Posted on September 28, 2016 | 1 comment

How systemic risk works in real life, real-time. From Wolf Richter at wolfstreet.com:

Investors are not amused.

The European banking crisis simply doesn’t let up. Currently, the big two German banks are grabbing the headlines away from the Italian banks, due to their size and the damage they could do to the global financial system. Other banks are in bigger trouble still, and some have already collapsed, with bailouts and bail-ins getting lined up.

Deutsche Bank had to endure a horrendous Monday after it was leaked on Friday that Merkel had refused to entertain bailing out the bank before the general elections a year from now. Merkel’s popularity has gotten broadsided recently, and bailing out bank bondholders with taxpayer money is just not popular at the moment.

Then Commerzbank, in which the government already owns a stake of 16% as a result of the bailout during the Financial Crisis, graced the headlines with leaks that it would lay off 9,000 employees, nearly one-fifth of its workforce. This will cost about €1 billion, according to the sources. To pay for it, the bank will scrap its dividend for 2016 to reduce the bleeding and preserve capital, in what is turning out to be the hellish environment of negative interest rates.

We’ve been writing about the European banking crisis for a long time, it seems, as it drags on, and meanders from one country to another, and sometimes we write about it in an amused fashion because we’ve got to keep our sense of humor in all this gloom.

But investors who believed in all the hype and in Draghi’s promises and in Merkel’s strength and in the willingness of all of them to do whatever it takes to protect bank bondholders and stockholders, and who believed in the miracle of Spain’s recovery, and in Italy’s new government and what not – well, they’re not amused.

For them, it has been bloody. The global financial crisis got swept under the rug. Then the euro debt crisis took down some banks at the periphery, and taxpayers stepped in to bail out the bondholders, mostly, and a lot more things got swept under the rug. But the problems weren’t solved. And as the decomposing assets under the rug kept exuding their pungent odor, investors held their nose and played along for a while.

But now it’s just getting worse. And investors are wondering what exactly is under these rugs – or maybe they’d rather not know for it’s too ugly to behold. And every time someone does look, for example at the Italian banks, they find even bigger problems that have started to metastasize.

This banking crisis has the potential to transmogrify into a financial crisis. All it takes is for one of the big ones to suddenly topple. The flow of credit would freeze up instantly. In an economic system that depends on credit, and whose lifeblood is credit, such an event is a financial crisis.

The problem isn’t restricted to a couple of Italian or German banks. It’s deep and wide.

To continue reading: EU Banking Mayhem, One Bank at a Time, then All at Once

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Did Germany Just Blink? by Don Quijones

Posted on July 31, 2016 | Leave a comment

It appears that Germany’s going to go a lot easier on Spain and Portugal than it did with Greece. Is Brexit forcing Germany to play nice? From Don Quijones at wolfstreet.com:

So who’s going to bail out the banks?

A most unusual thing happened in Europe this week. In a rare climb down, Angela Merkel’s government decided not to push the European Commission to impose a punitive fine on Portugal and Spain for their persistent failure to comply with their budget deficit targets, leading one Eurogroup minister to declare that the euro zone’s Stability Pact is “dead.”

Of Europe’s 27 commissioners, only four voted in favor of applying the fines; the other 23 voted against. According to El País, the deciding factor in the decision was an impromptu phone call from German finance minister Wolfgang Schäuble to some of the more conservative commissioners, giving them the green light to forego the fine.

The U-turn offers Spanish and Portuguese taxpayers a brief but welcome respite from Troika-enforced fauxterity. As we previously pointed out, if the Commission had imposed the fine, it would not have been paid by the politicians who failed to play by the rules agreed upon in Brussels; it would have been paid by the citizenry who are already suffering the consequences of the recession that helped cause the deficits.

But does this rare act of benevolence from Germany represent a genuine shift in policy toward the Eurozone’s Club Med members or is it merely an act of political expedience?

Naturally, Schäuble and Juncker would much prefer Mariano Rajoy, a man cut from pretty much the same ideological cloth as themselves, to stay in power. Spain has been an important ally of Germany under Rajoy’s charge and the support of his party was essential in propelling Juncker into the European Commission’s top spot. What’s more, if Rajoy does eventually form a government, a new round of pre-ordained fauxterity will quickly kick in.

But there are also signs that Germany may be beginning to marginally soften its stance on austerity, prompting rating agency Fitch to lament Europe’s abandonment, once again, of fiscal discipline and economic reforms.

Merkel’s government seems to have realized that for the European project to have any kind of future in a post-Brexit world, it will have to offer a little more carrot and a little less stick. If it doesn’t, the single currency that enables German manufacturers to export at a discount rate all over the world will eventually crumble under the weight of its own contradictions.

“The problem is this,” warns U.S. rating agency Standard & Poor. “The EU, as it is currently constructed and operates, doesn’t embody a coherent ‘pooling’ of the various dimensions of nation-state sovereignty, and therefore it’s unsustainable in its current form.”

Put simply, the EU is a half-way house with too much democracy and nothing in the way of transfer union.

“There are too many moving parts in the electoral politics of 28 nation states, and too many conceivable random-like events that could push political and economic developments in one direction or another, with impossible-to-predict consequences and timelines,” the agency added.

The perfect case in point is Italy’s banking crisis. If the country’s struggling banks are not saved with a combination of public and private money — a process that, to all intents and purposes, began on Friday with the announcement of Monte dei Paschi’s suspension of the ECB’s stress test as well as a €5 billion capital expansion later this year — the resulting carnage could unleash not only a tsunami of financial contagion but also an unstoppable groundswell of political opposition to the EU.

To continue reading: Did Germany Just Blink?

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The problem at euro banks, by Edward Harrison

Posted on July 12, 2016 | 1 comment

What hits bottom first, Italy’s banking system or Germany’s Deutsche Bank? And if the Germans won’t allow the Italians to bail out their banks, will they hold to the same standard with Deutsche Bank? From Edward Harrison at pro.creditwritedowns.com:

As the Brexit worries began two weeks ago, I flagged Italian banks – more than the UK economy – as one of my principle concerns, because of the potential to cause systemic damage to the euro system. And now the contagion is spreading, with Deutsche Bank the most obvious weak link. The question now is twofold. First, does the Italian banking crisis solve itself without a major overhaul of EU institutional arrangements? Second, if not, how does the EU solve this problem? Some brief thoughts below.

About a year ago, as the Greek crisis was hot and heavy, I wrote a post on why the euro is a failure. And in that post, I used the Italian economy and Italian banks as the most obvious economic example. The reasoning here was that Greece was only a more extreme example of what could befall other weak European economies in a generalized economic downturn. The Troika had submitted Greece to the rack under the pretense that it was a separate case. My argument was that it was not a separate case, just a more extreme case – and potentially the first case of economic collapse due to the failure of the eurozone’s institutional setup.

My view then – and today – is that Italy matters to the eurozone and the EU almost as much as France and Germany, given its role as a founding member of the European Coal and Steel Community in 1951 and the European Economic Community in 1957. If Italy were forced into a desperate situation, it could be fatal for the euro. And now, a year later, this nightmare scenario is coming to pass – or at least we are getting a glimpse of it. We don’t know if this is a real crisis or a mini-crisis yet.

What we do know is that the Italian banks are both under attack from investors and simultaneously undercapitalized. We know this because Italian bank shares have fallen by more than half this year. And we also know that the Italian Prime Minister Matteo Renzi has floated the idea of injecting 40 billion euros of state-sponsored capital into the Italian banks. Meanwhile, the ECB has made liquidity available to the Italian banks – if they need it – under the proviso that solvent institutions may just be going through a liquidity crisis. But, as we saw in the US, with TARP, eventually more state capital was needed.

Now, let’s remember the constraints here. During the sovereign debt crisis, banks and sovereign credits became co-mingled because banks owned lots of sovereign debt. And so as sovereign debt soured, so too did the condition of euro banks. This eventually required a bailout of Spanish banks via the state, making clear that – given the lack of a common bank resolution mechanism – the contingent liabilities of banking systems fell to the state. The other major eurozone bubble economy, Ireland, suffered a similar fate after the sovereign was forced to bail out its banking system, mandating a Troika bailout for the state in turn. This is a situation that no one wanted repeated. In fact, if bail-ins – like the one in Cyprus that Willem Buiter warned us would become the model – were in effect, Ireland never would have needed a bailout. As people like myself suggested at the time, banks would simply have defaulted.

To continue reading: The problem at euro banks

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Who’s Most Afraid of Contagion from Italy’s Bank Meltdown? by Don Quijones

Posted on July 10, 2016 | 1 comment

SLL has always disliked the term “contagion” when it is applied to systematic financial failure. It implies some sort of disease that hops from one financial institution or government to another. The term was used frequently in the last financial crisis, but the reality is that financial institutions and governments are all heavily leveraged. The better analogy is a common disease that manifests itself at differing times, and once one or a few start showing symptoms, others inevitably follow. Stepping off the pedantic soapbox, here’s a good article, notwithstanding the “contagion” in the title, on the looming European banking crisis, from Don Quijones at wolfstreet.com:

French and German banks.

Contagion is the reason Italy’s banking crisis is all of a sudden Europe’s biggest existential threat. Greece’s intractable problems are out of sight, out of mind; Brexit momentarily spooked investors and bankers; but Italy’s banking woes have the potential to wipe out investors and undo over 60 years of supranational state-building in Europe.

The last few days have seen growing calls for taxpayer-funded state intervention, a practice that was supposed to have been consigned to the annals of history by Europe’s enactment of new bail-in rules on Jan 1, 2016. The idea behind the new legislation was simple: never again would taxpayers be left exclusively holding the tab for European banks’ insolvency issues while bondholders were getting bailed out. But even before the new rules have been tried out, they are about to be broken, or at least bent beyond all recognition.

A loophole has already been found in the rules that would allow the Italian government and European authorities to raid European taxpayers in order to prop-up Italy’s third largest publicly traded bank, Monte Dei Paschi, while leaving bank bondholders and creditors whole, as Reuters reported a few days ago:

The rules, which have been in force since January, allow a state to directly acquire a stake in a bank that fails a stress test and cannot raise capital in the markets because of “a serious disturbance” in the domestic economy.

Oh, and no bank is officially allowed to pass or fail the European Central Bank’s 2016 stress tests, as we reported a few months ago, after a number of banks, including nine Italian banks, failed the test in 2014. Clearly, those at the top of the financial pecking order — banks and their bondholders — are protected once again from the disastrous consequences of another market meltdown, one that in many ways they precipitated.

The fact that in Italy, thanks in part to a quirk of the tax code, some €200 billion of bank bonds are held by retail investors adds an extra political dimension to the mix, as The Economist points out:

If the bail-in rules are applied rigidly in Italy, the outcry from savers will both damage confidence and leave the door to power open for the Five Star Movement, a grouping that blames Italy’s economic troubles on the single currency.

But it is the direct contagion effect that has Europe’s policymakers and central bankers most concerned. Contagion is a particularly acute problem in the Eurozone due to the so-called “doom loop” that exists between sovereigns and their banks, thanks in large part to the ECB’s tireless efforts to underpin both Europe’s biggest banks (by providing them with an endless supply of free money) and its bond markets (by doing “whatever it takes” to make European sovereign bonds virtually risk-free).

To continue reading: Who’s Most Afraid of Contagion from Italy’s Bank Meltdown?

 

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European Banks Get Crushed, Worst 2-Day Plunge Ever, Italian Banks to Get Taxpayer Bailout, Contagion Hits US Banks, by Wolf Richter

Posted on June 27, 2016 | 4 comments

Banks are wards of governments. The Brexit vote is roiling European governments and their wards. From Wolf Richter at wolfstreet.com:

European banking crisis jumps to the next level.

European bank stocks just experienced their worst two-day plunge ever in the post-Brexit fallout that rained down on the already blooming European banking crisis.

Healthy big banks would get over Brexit and the political turmoil it is spawning, particularly non-UK banks. But there are no healthy big banks in Europe. And non-UK banks are crashing just as hard, and some harder. This is about a banking crisis morphing into a financial crisis.

These bank stocks got crushed on Friday. And they got crushed again today. Italian banks have been reduced to penny stocks. Spanish banks are getting closer. Commerzbank, Germany’s second largest bank, and still partially owned by the German government as a consequence of the last bailout, is well on the way.

The two-day losses are just breathtaking. This table shows the largest banks by country with their percentage losses for today and for the two-day period:

Note that the European Stoxx 600 banking index fell 7.6% today for a 21.1% two-day plunge! It isn’t just a few banks whose stocks are collapsing!

Deutsche Bank’s infamous CoCo bonds deserve a special word. These hybrid bonds that are just above equity on the capital totem pole had spiraled down, with the 6% CoCos hitting 70 cents on the euro in February. At that point, they and all other Deutsche Bank bonds were propped up by government verbiage and bank money. The bank ingeniously announced it would buy back its own bonds! Like all these transparent market manipulations, the market ate it up, and even the CoCo bonds jumped to 87 cents on the euro. But that didn’t last long. They have since lost 11.5%, including today’s 3.7% plunge to 77 cents on the euro.

In Italy, the banking crisis that has been growing for years has reduced all major Italian banks to penny stocks. It has triggered bailouts of some banks, including the third largest publicly traded bank, Banca Monte dei Paschi di Siena. Now the taxpayer is going to get shanghaied into bailing them out to put a floor under the collapsing share prices and prevent them from going to zero.

Italian banks are bogged down in a sea of bad debt whose true dimensions are still unknown publicly, and that the ECB publicly estimates to be €360 billion. But every time someone looks at it, it gets larger.

According to “a banking source familiar with the government’s thinking,” as Reuters put it, the Italian government is now fretting about a hedge-fund attack on these zombies, following the Brexit turmoil! To counter this attack, the government is trying to figure out how to “protect its banks from a destabilizing sell-off of their shares” that “could tip them into full-blown crisis.”

(I have some news for the Italian government: Your banks have been in full-blown crisis for years!)

To continue reading: European Banks Get Crushed, Worst 2-Day Plunge Ever, Italian Banks to Get Taxpayer Bailout, Contagion Hits US Banks

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Brexit Blowback Hits Italian and Spanish Banks, by Don Quijones

Posted on June 26, 2016 | 1 comment

There are many European banks that have serious problems, and Brexit made them worse. If you read only one SLL post tonight, make this the one. From Don Quijones at wolfstreet.com:

Worst Day for Italian & Spanish stocks. Banks massacred.

The prophets of Project Fear reaped what they’d sown, as financial carnage spread across global markets on news that a slim majority of British voters had done the unthinkable by drowning out the relentless doomsaying and voting to leave the European Union.

The pound sterling plunged 8% against the dollar, to $1.37, its lowest level in three decades. The euro fell 1.93%, in itself a huge one-day move for a major currency. UK stocks surrendered over 3% of their value. But that was nothing compared to the havoc unleashed in other European stock markets.

Germany’s DAX plummeted 7%; France’s CAC 40 over 8%. But even that pales compared to what happened in Spain and Italy: the IBEX 35 plummeted 12.3% and the FTSE MIB 12.5%. It was their worst day on record.

The UK economy may be in for a hellishly bumpy ride in the months and years ahead, but the fact that London’s FTSE 100 was Europe’s least worst performing stock market on this day of all days suggests that Europe’s biggest financial risks probably lie elsewhere. And that is in euro land, in particular on its southern flank.

The unpalatable truth, as even the former governor of the Federal Reserve, Alan Greenspan, conceded today, is that the euro “is failing”:

It is a very serious problem in that the southern part of the euro zone is being funded by the northern part and the European Central Bank.

Another serious problem (on which Greenspan was somewhat less forthcoming) is Europe’s swelling ranks of heavily leveraged, scantily capitalized, bad-loan bedeviled, zombified banks. It was they whose stocks plunged the most today. Despite the fact that central bankers around the world, led by the Bank of England’s Mark Carney, the ECB’s Mario Draghi and the Federal Reserve’s Janet Yellen, had pledged to print into existence countless billions of pounds, euros and dollars in a last-ditch attempt to backstop Europe’s crumbling financial system, the EU Stoxx 600 Banking index plummeted 14.5%.

By far the worst of the fallout hit Italy and Spain’s financial sectors, where the banks saw their market capitalization decimated by roughly a fifth. For Italy’s biggest banks, many of which are filled to the gills with slowly putrefying non-performing loans (NPLs), it was their worst day in what is fast proving to be their worst year, ever. If the current trend continues — and there’s no reason to suspect it won’t — some are unlikely to even make it to Christmas in one piece.

The shares of Italy’s biggest bank (and global systemically important institution), Unicredit, slid more than 23% on Friday. They are down 59% since January. The stock of Banco Populare, Italy’s fifth biggest bank, also lost 23% on Friday and is down over 80% since the beginning of this year. The fourth biggest institution, the perpetually failing Banca Monte dei Paschi di Siena whose loss-making derivatives bets were made under Mario Draghi’s watch as Bank of Italy’s governor, fell by 16.5%.

In Spain, the financial sector hit new yearly lows as €23 billion was wiped off their combined market cap. It was the worst rout the sector had ever experienced. Bankia lost 20% of its share value. So, too, did too-big-to-fail Santander and Sabadell, two of the four European banks singled out by JP Morgan analysts as the most exposed to a Brexit fallout. Spain’s other biggest banks — BBVA, Caixabank and Popular — weren’t far behind despite their lesser exposure to the UK market.

To continue reading: Brexit Blowback Hits Italian and Spanish Banks

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Whiff of Panic? Global Bear-Market Progress Report, by Wolf Richter

Posted on February 8, 2016 | Leave a comment

From Wolf Richter at wolfstreet.com:

Watch the banks.

For once, aggrieved investors can’t blame China. Markets in China are closed for the New Year’s holidays.

After a very ugly week, we expected stock markets to rise this week on the simple principle that nothing goes to heck in a straight line. But we’ve been wrong on this before, and that line could be straighter than we’d expect. So, the US and Europe are starting out the week with a rout.

Last week in the US was particularly ugly for momentum stocks, and for companies that had announced lousy earnings or given squishy forecasts, and even for startups with recent IPOs that were once highfliers and have now crashed. Not even the promise of share buybacks works anymore. Financial engineering has lost its effectiveness. Central-Bank imposed negative interest rates aren’t propping up stocks anymore. None of these tricks works anymore. That’s what markets are learning.

And today, the theme carries over. At the time I’m writing this, the Dow and S&P 500 are down about 2.4%. The Nasdaq is down 2.8%, scooting closer to a bear market: down 19% or nearly 1,000 points from its high last June.

In Europe, last week was tough: The London FTSE -3.9%, the German DAX -5.2%, the French CAC 40 -4.9%, the Spanish IBEX 35 -3.6%, the Italian MIB a juicy -7.5%. A lot of people define a bear market as a 20% decline from a (more or less recent) high. As of Friday, all of these markets, except the FTSE, were already in a “bear market.”

And on Monday, the FTSE also fell into a bear market, down 2.7% for the day. The DAX fell 3.3%, which brings its six-day loss to 8%. The CAC 40 fell 3.2%, the Milan MIB 4.4%, bringing its six-day loss to about 12%. Ugly, ugly, ugly.

Europe’s big banks are seriously listing. Italian banks, weighed down by immense amounts of non-performing loans, are undergoing a bailout of sorts at the moment. Shares of Deutsche Bank and Credit Suisse are getting crushed. Their CEOs have gotten keelhauled last year. New CEOs are at the helm now. Some of their bonds have gotten trampled. Credit default swaps are blowing out.

To continue reading: Whiff of Panic? Global Bear-Market Progress Report

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