Technical & Fundamental Oil Reports Specialists

Follow us

Eurozone dream under threat

Published Monday, November 23rd, 2015

The terrorist atrocities in Paris and Mali and a series of other terrorist scares including what has effectively been a weekend shutdown of Brussels, the home of the EU Commission and Nato, has not deterred stock market confidence. Quite the contrary, last week the US and European stock markets gained over 3% with France’s CAC + 2.14% and Germany’s DAX +3.84%. The Nikkei and Shanghai Composite were up 1.4% and the Russian stock market had a 9% revival presumably based on the feeling that President Putin is coming in from the cold.

US investors have embraced an interest rate rise as good rather than bad and are now preoccupied with the rate of increase thereafter. If the FED chokes again does that mean US equities will take a beating? Don’t bet on it, the rational is likely to switch back to the asset upside that comes from zero interest rates and speculation on QE 4. Bulls can always find a reason. European investors have embraced the high probability of further ECB stimulus on Dec 3. When Mario Draghi says that ECB policymakers will “do what we must to raise inflation as quickly as possible” that sounds and smells like a reprise of ‘whatever it takes’ and a signpost to euro/dollar parity.

So much for the short term reaction. The long term fall out is not so promising especially for Europe and the eurozone in particular. The ECB President has not been shy in expressing great concern about the sluggish eurozone recovery, the lack of structural reform and the need for much closer political union in order to achieve a successful economic union. The migrant crisis had already put the Schengen agreement under pressure and the Paris attacks and subsequent alerts have brought it to breaking point. Border controls are back, ironically led by France the country where the eurozone dream was invented and Schengen has been sacrosanct.

to read the rest of the report, please click here

Posted by David Hufton