Blame it on Lisbon...and Madrid and Budapest.

02/04/2010 11:29 am EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

First it was Greece. Now it’s Spain, Portugal, and Eastern Europe.

Heaven forbid that investors shouldn’t  have a financial crisis somewhere in the world to worry about.

A European Union pledge of support for the Greek government’s plan to cut its current 12.7% (of Greek GDP) budget deficit down to 3% has some investors deciding that the Greek crisis is settled enough so that they can start worrying about problems elsewhere in the European Union.

That’s not to say that Greece is out of the woods. Greece’s ASE Index was down 2.7% as of noon in London on news that the country’s biggest labor union is planning a strike to protest the wage and job cuts in the plan.

It’s just that investors are now taking a harder look at other potential trouble spots.

Portugal’s PSI-20 Index was down 4.2%, the biggest decline in 14 months, as of 9:00 ET in New York this morning (February 4). Spain’s IBEX Index dropped 3.7% to the lowest level since July. The price of credit-default swaps to insure against a default by Hungary climbed to a record.

Investors fear that huge budget deficits in these countries could lead to further cuts in the credit rating on their sovereign debt.

As you might expect on recent trends, all this uncertainty was good for the U.S. dollar as the currency moved up against the currencies of 15 out of 16 of the country’s biggest trading partners.

That worry, in turn, has sent commodity prices down—gold is down almost $40 an ounce as of 11 a.m. ET—and increased the downward pressure on U.S. stocks that were already struggling on news that showed more U.S. workers than anticipated filing new claims for unemployment in the past week.

 The stock market has divided its days lately between declines when investors, focusing on bad news from overseas economies from Greece to China, flee riskier assets in favor of the U.S. dollar, and advances when investors, focusing on good earnings and economic news from the United States, feel free to put money back into commodities and some overseas markets.

Today definitely falls into the first group.

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