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June 11, 2012 – 5:11 pm

Over the weekend European leaders met to agree on recapitalizing Spanish banks. They agreed to infuse $125 billion to help bail out more reckless financial institutions. Initially the markets fell in love with the news overnight as futures soared with indication of the Dow being up 150 points to open Monday’s session.

When trading started however, reality quickly set in. The Dow opened up only 90 points and quickly sold off sharply. One worry is the source of the funds to help Spain and how easily all European leaders will give up that cash without major stipulations. These trepidations were reflected in Spanish bond yields which rose back above 6.5% for the first time in a month and shows everyone in the markets that the ills in Europe are still nowhere close to being resolved.

A new worry about Italy has also began to creep up which is the mother of all European problems. They carry over $2 trillion in debt and recently had higher borrowing costs than Spain. If those issues continue to grow then we have not seen anything yet when it comes to European economic and market turmoil.

The economy here at home remains choppy with earnings growth slowing, but still positive. However, the bottom line lies with how well Europe deals with their problems. Until their politicians start to work together and take decisive action the world markets will be held at gunpoint by their issues and continue to wonder what is next over Europe.

Good Trading

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