Market Morning: Europe's 'Lehman Moment'

Updated from 6:55 a.m. ET to include results of latest Italian bond auction.

NEW YORK ( TheStreet) -- Santa's sleigh has hit some turbulence and it looks like it's going to go down to the wire on whether the S&P 500 can muster enough momentum to finish 2011 in the green.

Dennis Gartman, a well-known commodities investor that also provides market commentary, attributed Wednesday's swoon to rumors that a major credit downgrade of European sovereign debt was on the way. And although that hasn't materialized, he's sensing real apprehension across the pond following the euro breaking its 1.3040-1.3050 support level.

"The problem in Europe is that we've arrived at Europe's own 'Lehman-moment' when banks and institutions are wholly unwilling to lend money to anyone, anywhere," he wrote.

Gartman is also changing his stance on eurozone banks parking the vast bulk of the funding generated by the European Central Bank's long-term refinancing operation last week back with the ECB. Previously he thought it was the "reasonable" thing to do as institutions awaited making investments elsewhere.

"Now we consider it disconcerting for it shows the utter sense of confusion and the even more utter sense of fear that has engulfed the banking system in Europe," he said. "Rather than viewing these new credit lines from the ECB as a source of funding for investment, the banks in Europe are viewing those ECB-created funds as a source of 'fear capital' to be used should worst-come-to-worse on the continent. Fear rather than optimism is driving the banking system."

The mounting evidence of a lack of trust is what bothers Gartman the most.

"We fear then that worse is about to happen, for the very core of things banking and economic depend upon trust and trust is now wholly lacking in Europe," he wrote, adding later: "Thus any credit lines that the ECB has offered, or may in the future offer...and rest very much assured that the ECB is going to offer more, not less credit; it has no choice... are being drawn down and then parked. One can almost smell the fear evolving in Europe at the moment."

Yikes. Not exactly the recipe for a happy new year.

The latest bond auction in Italy saw mixed results as the country reportedly sold around ¿7 billion worth of bonds, not quite hitting the top of a ¿5 billion to ¿8.5 billion target, according to The Wall Street Journal, although yields did decline, narrowing the spread between 10-year Italian debt and the equivalent German bonds.

As for the rest of Thursday, the economic calendar features the usual weekly initial and continuing jobless claims at 8:30 a.m. ET with the consensus at 368,000, showing some faith in the recent decline to levels unseen in more than three years.

The market also gets Chicago PMI for December at 9:45 a.m. ET, pending home sales for November at 10 a.m. ET, and weekly crude inventories data at 11 a.m. ET.

In corporate news, there are no earnings reports of note. Yahoo! ( YHOO) could see some active trading though following reports that China's Alibaba Group has hired a U.S. lobbyist firm in preparation for making a bid for all of Yahoo! if a deal to buy back some of its assets from the company doesn't work out.

Other companies in the spotlight on Thursday include Chesapeake Energy ( CHK), which has agreed to sell its natural gas pipeline system in the Marcellus Shale to an affiliate to $865 million; Alexion Pharmaceuticals ( ALXN), which agreed late Wednesday to acquire privately held Enobia Pharma for $1.08 billion; Exar ( EXAR), which lowered its fiscal third-quarter revenue outlook because of weak economic conditions in Europe and Asia and inventory corrections; and Leggett & Platt ( LEG), which said it expects to record a charge of $36 million in its fiscal fourth quarter, mainly related to restructuring activities.

-- Written by Michael Baron in New York.

>To contact the writer of this article, click here: Michael Baron.

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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