The US stocks plunged dramatically with Dow Jones losing over 200 points and NASDAQ down over 2%, making today the worst one-day loss in 4 months. The main drivers for the significant drops were the bleak corporate earnings and a lack of progress at the EU two-day summit. The gains seen earlier in the week after earnings from Microsoft, General Electric and McDonald’s were short-lived and failed to meet expectations.
In Europe, the 4-day winning streak came to an end after disagreement from the European UNION leaders over how to ease the sovereign debt.
The STOXX Europe 600 Banking index was the worst-performing sector, dropping 2.4 percent after Germany took a hard line on Spain regarding the use of the region’s bailout funds to directly recapitalize Spain’s debt-laden banks.
The EU leaders have agreed to implement the legal framework of Europe’s banking supervisor by 1 January 2013. Meanwhile, the European Central Bank has been assigned to supervise the Single Supervisory Mechanism (SSM) in an effort to support Europe’s shaky banks. Ultimately, the SSM will have the ability to work alongside Europe’s permanent bailout fund, the European Stability Mechanism (ESM) and provide conditional funding to Europe’s most susceptible banks.