Return of the Euro Crisis: Italy Quakes, Rest of the World Shakes and Merkel’s Empire Breaks
Europe’s many fault lines are spreading once again, bringing the endless euro crisis saga back in 3-D realism. Italy gained a new anti-establishment government last week, even as Spain elected a new Socialista government that could crack Catalonia off from the rest of Spain. All of Europe fell under Trumpian trade-war sanctions and threatened their own retaliation. And Germany’s most titanic bank got downgraded to the bottom of the junk-bond B-bin.
The Italian shakeup caused US bond prices to soar (yields to drop) in a flight of capital from European bonds, yet US stock investors took this invasion of troubles from foreign shores as good enough news to end the week on a positive note. The NASDAQ especially never looked happier, though financials feared contagion. As a result, the contrast between tech stocks and financials burst upward to its highest peak since the top of the dot-com frenzy:
While Europe’s troubles apparently sounded like great news to US stock investors, the Italian crisis caused EU bank stocks in aggregate to take one of their largest avalanches in history, ending in a one-week cliffhanger at their lowest level in two-and-a-half years. Deutsche Bank, Germany’s titan of global finance, ended looking like the spawn twin of the Lehman Brothers:
Deutsche Bank appears to be leading the way into a full blown euro crisis like Lehman Bros did in the US financial crisis.
In one week, Europe with its impossible euromess moved back into position of being the world’s chief menace. The Eurozone is a house of cards with many exits, each with their own name, as I’ve written about frequently in the past, and it’s time to pay the never-ending euro crisis some attention once again.
Quitaly looks like next Brexit in everlasting euro crisis
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