Thursday 24 May 2012
Euro Crisis Stains Confidence Of Investors
By Ben Taylor (Sales Trader, CMC Markets)
Markets failed to hold ground today as the gravity of the European situation stains the confidence of investors.
The informal meeting in Brussels of EU finance ministers was hoped to produce market redeeming statements. But as
expected little to nothing new was fashioned to provide the markets with confidence.
The HSBC Flash Chinese manufacturing numbers today showed a slowing Chinese economy which is not immune from the
European debt crisis. The market gyrated after the announcement with a fall followed by a rise that was later reversed.
The falls that seem to be building day by day are reflecting the increased chance of a Greek exit from the Eurozone.
While European leaders are giving statements to the contrary the market is not so sure.
The fall in the Euro which is now below 1.26 USD is the lowest level in almost a year. The Euro displays the jitters of
a market jumping at every European headline. The Euro’s defensive attributes are being recognised throughout the
investment community and providing justification for risk assets to act in the same manner.
Talk of French, Italian and Spanish finance ministers joining together to demand a common Euro bond has provided another
talking point for ministers. The controversial idea would allow the ECB to authorise quantative easing much the same way
as the Federal reserve. While the idea is believed to benefit the Eurozone as a whole the German government are against
an idea which will rob the rich to pay the poor.
Rumours of a EU proposal to guarantee bank deposits has provided another solution to stop a run on Spanish and Greek
banks. The proposal may be needed sooner than later for European banks who hold the highest loan to deposit ratios in
the world.
ENDS