Tuesday, April 10, 2012

Europe's markets reopen today - Euro crisis could be set to re-appear

The following are the final paragraphs and chart from a posting on Acting Man, linked here. Note the four different coloured scales when viwing the chart., which is best viewed when zoomed in upon!

10 year government bond yields of Italy, Greece, Portugal and Spain – suddenly yields are shooting higher in unison again, with the other weak euro-land sovereigns following Spain's yields higher - click chart for better resolution.



We must be alert to the possibility that the pause in the euro area crisis may be over. If that is the indeed the case, then a rocky period for 'risk assets' may lie directly ahead. Of course we can not guarantee that this is what is happening – the markets may yet pull back again and reveal these recent moves to be merely corrective in nature.
However, the economic situation Spain finds itself in is well known for being quite grim at this stage. As we have chronicled in these pages, the banking system is in dire straits, notwithstanding ample liquidity provisions by the ECB. Unless something happens fairly quickly that convinces market participants that the danger is once again postponed, this is a situation that could very quickly get out of hand again. In fact, if we were to bet, this is what we would be inclined to expect. 

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