A number of people had problems with buying into last week's Euro-zone deal as a panecea for the problems ailing the common currency. Their concerns were mostly centered on the lack of details about how the bank recapitalizations would take place and how the rescue fund (EFSF) would get strengthened.
But those objections now seem almost trivial following the surprise announcement by the Greek government to hold a referendum on the issue. This announcement has overtaken last week's deal and effectively ensures that global markets will remain hostage to electioneering in Greece at least through January, which is the earliest that a referendum could take place.
I would love to read the immediate (private) reactions to the Greek announcement of the German chancellor Angela Merkel and French president Nikolas Sarkozy -- aka "Merkozy." I am not sure how colorful the French and German languages are. But I can bet that their immediate reactions would make for interesting reading if ever made public.
With the Euro-zone deal turning out to be no more enduring than Kim Kardashian's wedding, we are back to square one on the European question. Everything else takes a backseat.
We will likely need an impressive showing from the October manufacturing ISM report coming out a little later to get our minds off the Greek shock. But that is unlikely given Monday's relatively soft Chicago PMI reading. The Fed starts its two-day meeting today as well, but few surprises are expected on that front. Other than Bernanke's press conference Wednesday afternoon, the Fed meeting may be a non-event.
On the earnings front, we had a solid earnings and revenue beat and positive guidance from Pfizer (PFE - Analyst Report). Archer Daniels Midland (ADM - Analyst Report) came short of expectations as high feedstock costs weighed on margins. Baker Hughes (BHI - Analyst Report) also came modestly short of earnings expectations on in-line revenue.
if the market's behavior over the last few months is any guide, then we can say with a lot of confidence that the Greek news supersedes everything else. Reading "Merkozy's" reaction to the Greek announcement would have provided some relief, but unfortunately we may never see those choice words.