Just as October gave us a month with equities up 10+%, November started with more negativity. While European financial officials last week worked countless hours to find an outlet to contain and absorb losses on Greek (along with other peripheral) debt, Greek Prime Minister George Papandreou made a surprise announcement that a special referendum would be held to approve this latest bailout.
Markets were shocked, but this isn’t the first time political posturing has entered the economic process, especially during the European debt issues. This may not turn into a deal-breaker, but yet is just another wrinkle into this soap opera. From the prime minister’s standpoint, taking the item to the legislature rather than making a unilateral decision might be a smart move politically at home, despite the perceived uncertainty it leaves the rest of us with. Greek politicians are very aware of the tightrope they’re walking, and are hoping to, even if cosmetically, contain some of the damage and blame while saving face in front of their own electorate.
Pessimism seems to come in twos, and it’s often interesting how one piece of data can very easily outshine another on good (or bad) days. Today, the second negative piece was the ISM survey coming in a bit weaker from a headline level, despite its composition being fairly decent (new orders were the highest since April). The weakness was caused by inventory drawdown and lower export orders, for the most part.