Israel Market Experiences Sharp Decline on Sunday & More EU Problems

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Israel is the one country whose stock market is open on Sunday and today was a bad day. Israel’s benchmark stock index plunged the most in almost 11 years after Standard & Poor’s lowered the U.S. credit rating and amid concern the widening sovereign debt crisis in Europe will stall global growth.

Israel’s Discount Bank, their third largest lender, slid 10%. All 25 shares in the TA-25 Index tumbled, pushing the gauge down 7 percent, the biggest decline since October 2000, to 1,074.27 at the 4:30 p.m. close in Tel Aviv. The index is near the so-called bear-market territory after retreating 19.9 percent from a record high of 1,341.89 on April 21.

Israel is experiencing a big hit from our ratings downturn because it has large exports to the United States and the Euro zone.

If Israel is any indication, we are in for some problems tomorrow. QE3 here we come. More printing and more spending here we come. Larry Kudlow said yesterday about Obama, “There he goes again. Out on the campaign trail, President Obama is proposing more federal spending as his answer to sluggish growth and jobs. That won’t do it, Mr. President…He wants more infrastructure spending, undoubtedly in the form of an infrastructure bank. That’s a terrible idea. It’s borrowed from Latin America, where bloated and corrupt bureaucratic construction agencies have helped bankrupt any number of countries in the past..”

In another controversial decision, the European Central Bank officials will purchase government bonds of Italy and Spain on a massive scale. This is a dramatic move to deal with Europe’s growing debt crisis. It completely changes the role of the ECB and the EU monetary union. It could impact the markets more dramatically than the ratings downturn. However, Italy and Spain have agreed to real cuts, unlike the non-cuts in the United States. Italy and Spain have agreed to rush the reforms through. Read here: Reuters

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