A Sea Of Red
If an ECB in QE mode, €60 billion in cash, €440 billion from a pooled EMU effort and €220 billion from the IMF only lasts a week, then I’d humbly submit that we have a problem.
(Screenshot from Bloomberg, click for better viewing)
It is difficult to say whether it was former Fed chairman Volcker’s comment on Euro breakup which set alight the initial fire, but what is certain is that it does not seem that markets have calmed down. And they shouldn’t be calm. The package may be impressive, but the growth prospects of the Eurozone have now been moved down more than a couple of nudges. And still there is a looming and large risk that debt restructuring will come eventually (I believe so, for example).
As ever, I should point out that, in my world, slumping stocks do not constitute a problem as such. But volatility is rising and, with it, risks of a veritable rout against which it is difficult to see where policy makers will find the tools prevent a sea of red turning into severe bloodletting.
Have a nice weekend, by the way; I am sure things will be better on Monday… well, I am keeping my fingers crossed at least.