5/18/2012
By Carlos Guillen, Research Analyst

Equity markets took a turn into loosing territory during Friday's trading session, with little in terms of hard macroeconomic data and with lots of speculation about the true worth of Facebook's stock. On Friday the spotlight was taken away from Europe and put on Facebook, as its first day of trading began. However, it is apparent that the spot light only lasted a couple of minutes as the stock quickly shied away from its $45.00 peak price reached in the first minutes of trading and ended the day wanting to go below the day's $38.00 limit. Now that the euphoria about Facebook has diminished, it is back to Europe.

The situation in Greece only continues to intensify, and the belief that the nation will have to leave the euro zone ramps higher and higher. Yesterday, Greece's credit rating was downgraded one level to CCC from B- by Fitch Ratings on concerns the country will not be able to gain the political support needed to sustain its membership in the euro area. It is apparent that now major institutions are increasingly worrying that the failure to form a government that would abide by the bailout terms would mean an abandonment of the euro currency.

While it is difficult to gauge the repercussions of a Greek exit, some nations are more vulnerable to than others, in particular Spain. In fact, yesterday Moody's Investor Service downgrade 16 Spanish banks as the nation's economy continues to weaken and as the government's capacity to provide support for troubled lenders diminishes.

This weekend leaders of eight of the world's biggest economies will meet to discuss strategies to keep the debt situation in Europe from scaling out of control, putting the rest of the world under economic pressure. At the moment Greek civilians have been closing out savings accounts in large numbers; however, it is still not considered a bank run. The fear at the moment is that if there is a bank run in Greece this will also spread to other weak euro nations such as Spain and Portugal.

Carlos Guillen
Wall Street Strategies