Given all the news that comes out of Europe, I figured it
would be a good idea to provide readers with a quick way to find easy to read
news stories and then see how markets react.
First, here is some good source material from the NYT. I choose Spain and Italy given they are the
rage right now. The pages are set up rather nicely, with a summary of all
relevant information at the top, followed by the newest NYT articles on the
bottom:
Next, when a new piece of information comes out how will the
markets react? I like to follow the yield on government
bonds. Bloomberg provide 10-Year yields
and I picked three of the riskier Euro nations and then Germany as a way to
compare:
Basically if things in Europe are worsening riskier Euro
nations will have their yields rising and Germany should have its yield falling
(note: this might not hold in the remote worst care scenario).
There is also Intrade to see a
market prediction on a county leaving the Euro.
Without getting into detail, essentially just look at the % chance.
There are obviously many more places to mine for data. I think these are the most basic and
direct.
One thing to note, it appears the trend is that markets are reacting less and less favorably after
every “positive” announcement. To me
this indicates markets aren’t buying what Europe is selling. Again, as I mentioned in my previous post, I
don’t think this will happen until Germany backs substantial systemic change.
Update: I wrote this a few weeks ago, but since
then there
has been a relatively big (well bigger) development – basically banks will
now be able to borrow directly from the ECB, not their own Central Bank.
This is bigger than any news out of the EU in awhile. While the restructuring I think is needed, it
is certainly a step in the right direction:
- A step toward UNITY. This is key, all countries need to start moving together, not apart.
- By recapitalizing the banks directly through the ECB, the risk of the worst case scenario credit crisis scenario (bank runs) appears to be reduced, although not eliminated.
