Sliding equities explained, in the eurozone
The euro fell sharply today as United States stocks realized their worst slide in over a month as the boost of confidence which was felt after last weeks eurozone debt agreement had begun to unravel as well as the Japanese intervention to stop the ascent of the Yen. The god feeling about the eurozones genius plan has proven to be short lived and the risk aversion is again digging its heels into the markets. The Greek prime minister George Papandreou has sparked sharp sell offs in the euro as he is quoted saying that Greece will be holding a national referendum to oversea the details of the plan.
He has also promised that he and the Greek government would stand by whatever the Greek people vote for. In addition to this there have been fresh weaknesses seen within Italian government bond prices which has had the effect of driving the yield on the countries ten year debt plan much higher than the perceived six percent level. The single European currency has erased the gains that it had made last week by once again falling below the one point four versus the dollar point.
Virtually every other risk asset class has failed to sustain any rally in Italian government debt”. The ten year yield of Italy has risen seven basis points to around the six point one percent mark even though core German and US government bonds had increased as doubts about the eurozone continue the worry on flight safety. The mood of risks in the market was strengthened when the dollar enjoyed a wide advance when the Japanese authorities stepped into the currency market in an attempt to drive the yen lower. Following a succession of record lows between the dollar-yen further evidence of the markets skepticism was seen in response to equities within the Tokyo market. A US unit accelerated its gains by raising them by two percent on a trade weighted basis as new doubts over the eurozone deal had dominated trader’s opinions.
Many strategists are still very confident that stocks could find support from many of the stronger US companies. Industrial commodity prices were quite a large amount lower than the dollars strength and than that of the global equity retreat. The question on the mind of many involved in the debate is just how much will equities continue to slide as the eurozone seems to plunge into the financial abyss?