Monday, August 01, 2011

EU eyes on Washington as their own house goes up in flames!

EU growth and confidence indicators fell today!

Interest on Spanish and Italian 10 year bonds were on the rise again today and one report this evening has this gloomy prognosis:

JP Morgan warned clients that Italy has a thin margin of safety and risks running out of cash to cover spending as soon as September. "Italy and Spain will run out of cash in September and February respectively, if they lose access to funding markets," said the bank's fixed income team of Pavan Wadhwa and Gianluca Salford. Worries about Italy's immediate cash level risks leading to "a self-fulfilling negative spiral."

Later in Frankfurt, the Dax Index tumbled, closing down over 2% on the day. In Spain the main index was off by 3.2%, read here, while the same report has this to say on the market in Italy:

The main Italian stock index plummeted 713 points, or 3.9%, to 17,720.44, its lowest since April 2009.

The Italian market has fallen 23.5% from its 2011 peak in February, meaning a new bear market is underway. The threshold for a bear market generally is a 20% drop in major indexes.

Watching TV news broadcasts this evening, all eyes seem to be on the done deal on the debt ceiling in the USA whilst waiting for the votes in Congress.

Few, it appears, have noticed that their own household seems to be about to be engulfed by flames! The EU leaders departed on holiday making no increase in the EFSF and no provision for helping Spain and Italy stave off the inexorable rise in their bond yields, until after September. Mme Lagarde at the IMF is silent!

It may be hot on holiday, but if things are left like this, it will be hotter still in the Capitals of these complacent incompetents when they eventually return!

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