Toronto Stock Exchange (TSX)Sami Siva
North American markets took a stomach-churning nosedive on Thursday afternoon, raising questions about what might be in store Friday as fears mount over Greece's debt woes spreading to other euro-zone countries.
The Globe and Mail asked several investment fund managers to speculate on Friday's market reaction.
Irwin Michael, president of I.A. Michael Investment Counsel Ltd.
North American stock markets will be looking for direction from overnight events, and how central bankers will react to Greece's financial problems, Mr. Michael said.
"Greece is a similar situation to when Lehman was let go," he said. "When Lehman went bankrupt, you lost all sense of confidence. Greece is probably the tip of the iceberg and unfortunately the EEC, the European central bank and probably the IMF cannot afford to let this country go bankrupt…
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"I think people are waiting for the results of the U.K. election [Thursday] and they want to see what happens overnight in Europe, in particular Greece," he said. "They want to see what happens in Hong Kong, Japan and China. Those markets were weak today and investors will want to see what the central banks are going to do because clearly they have to do something...The EEC and the various international monetary authorities have to provide some sense of comfort that they are still minding the store."
If nothing happens, then the markets drift again, he suggested. "But markets never drift up."
Robert McWhirter, president of Selective Asset Management Inc.
Stock markets could head lower on Friday as investors may want to sell holdings to build up their cash amid increased uncertainty surrounding Greece's debt crisis and jitters about unexpected volatility, Mr. McWhirter said.
"Most people - as a guess - are going to want to end up raising cash going into the weekend," he said. "Today, a bunch of stop-losses were triggered and that led to mechanical programs that basically said 'sell the market'...
"The question for tomorrow is whether there is going to be more of the same with the uncertainty in Greece and potential spreading of concerns about sovereign debt in other countries in the European Union," he said.
Investors are worried about slowing economic growth in Europe because of concerns of austerity programs in Greece and potentially in Britain and other countries in addition to a "slowdown on purpose" in China to cool off an overheating economy, he said.
Brandon Osten, president of Toronto-based Venator Capital Management Ltd.
It's uncertain what North American markets will do tomorrow, but investors won't care about what happened on Thursday because it is "generally accepted" that an eerily sharp downturn in the U.S. market was caused by a trading error, Mr. Osten said.
"Supposedly, a trader accidentally put in a $15-billion [U.S.]instead of $15-million program [sell]order, and that is what caused the ridiculous 8 per cent [down]move we saw around 2 p.m.," he said. "It was a trading error. The market was back to normal by 3 p.m.…
"Whatever happened today will not affect what happens tomorrow other than people are worried about the Greek economy and Greece defaulting on its debt. But that is a concern that is exclusive of what we saw today…
"When the European markets open, they are going to be increasingly concerned about what is happening in Greece. The European markets are going to sell off a bit, and the U.S. market could open a little bit lower."