The financial markets went into a freefall yesterday because of a crisis in Argentina and continued troubles with the Portuguese bank Banco Espírito Santo. The Ibex fell 2.1% and other markets around the world did not behave much better. After markets in Europe closed, Wall Street fell another one percent. In Portugal, Espírito Santo's stock shaved 50% after troubles earlier this month.
The day started out rocky as investors watched Argentina. As expected, fears that the Kirchner's government would default on international debt came true, and the impact on Spanish companies with exposure across the Atlantic was real. And the chance that JP Morgan could buy Argentine bonds to vulture funds could nix fears. Portugal's solution looks worse. The problems that BES is having don't have a visible endgame. The entire family and its holding companies are entering bankruptcy hearings. Even though the corporate headquarters insists that the crisis is fading, time is proving that elEconomista was right: this is a major crisis. Specifically, BES said yesterday that it suffered 3.5 billion euros in first-quarter losses and announced that is trying to raise funds and sell assets.
Turbulence on both sides of the Atlantic yesterday proved that the butterfly effect is true, and for BES more problems could be ahead. Time will tell what happens.
