Dow Jones Industrial Average (DJIA) futures struggled for traction in early trading Monday, pointing to a weak stock market open on Wall Street. The plunge follows European markets lower as a cocktail of problems push the eurozone into crisis.
What a way to start the week. In a matter of hours on Monday morning, Thomas Cook filed for bankruptcy, German manufacturing went into contraction, and the euro collapsed against the dollar.
Dow futures tumble 40 points
S&P 500 futuresalso fell 0. (% while the tech-heavy) Nasdaq Composite futureswere flat.
Thomas Cook files for bankruptcy
Major UK travel operator Thomas Cook threw in the towel andfiled for bankruptcyon Monday morning. Last-minute talks with creditors and investors proved fruitless and the company declared insolvency.
All bookings, flights, and tours were immediately cancelled. The UK government was forced to step in to rescue an estimated 150, 000 holiday-makers stranded abroad in what it called the “largest repatriation in peacetime history. ”
The UK governmentrefusal to bail out the company, however, is telling. After the backlash from the 2008 bank bailout, governments know that public bailouts are political suicide. As the UK and Europe teeter on the edge of recession it’s a warning to companies: there’s no safety net this time.
Dow shaken by Germany manufacturing collapse
To throw fuel on the fire, Germany’s manufacturing industrywent into contraction on Monday. Germany’s PMI dropped below 50 – a psychological barometer for the health of the industry – for the first time since October 2012.
The drop is more than analysts were expecting and points to a contraction in German output. As the largest EU economy, the ripple effects are being felt throughout the eurozone. The German DAX index immediately fell 1.5%, pulling the Euro Stoxx 50 with it.
Euro gets crushed against the dollar
At the same time, the eurocrashed below $ 1. 10 against the dollar. Traders are anticipating that Mario Draghi and the European Central Bank (ECB) will be forced to add yet more stimulus on the back of Germany’s manufacturing crisis.
All this despite the fact the ECBcut rates deeper into negative territorylast week and restarted its quantitative easing
The collective European crisis on Monday is weighing heavily on Dow futures on Monday and hints at a weak open on Wall Street.
September 23, 2019 10: 11 AM