European Stock Markets Fall on Spanish PM Corruption Claims

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European Stock Markets Fall on Spanish PM Corruption Claims

European Stock Markets Fall on Spanish PM Corruption Claims



The re-emergence of Eurozone worries sent shivers down investors' spines yesterday as the sellers cascaded into equity markets, driving them lower following a spike in borrowing costs for the likes of Spain and Italy.

There are no prizes for guessing what the markets think of the political uncertainty in the two countries.

A change at the top in Spain could mean a drastic turnaround in the efforts to sort out their fiscal problems. Meanwhile, a possible return of Silvio Berlusconi to the Italian premiership, with promises of tax hand outs left, right and centre, does little to inspire confidence in the country addressing its own considerable debts.

As is often the case with big falls in the stock markets, there's a fear that trying to catch a falling knife is a fool's game. Instead, many prefer to stand on the sidelines, waiting to see if there's another big lurch lower in the coming days that might present a better entry or re-entry level.

So far this morning, the FTSE is behaving as if that entry level is here as it bounces on the open to higher levels than our initial opening calls.

Perhaps investors feel that the sell off was so sharp, in what has been such a strong uptrend so far, that it was overdone and it's time to fill up their boots again.

It seems that every market was affected by yesterday's increase in European political uncertainty. Whilst the overall uncertainty has been lurking in the background for some time, Spain, which saw calls for the resignation of Prime Minister Mariano Rajoy over alleged illegal payments, was never expected to be a main contributor.

As a result, the focus shifted back onto Europe and the threat it represents to the global economic recovery.

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By Simon Denham, 5 February 2013


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