We Are the World: And It Was a Tough Week For Most World Markets.

This image shows Angela Merkel who is the Chan...Image Wikipedia

German Chancellor Angela Merkel sent a pretty clear message to the Markets this weekend – that Europe's leaders will not be bullied into action just because the markets are throwing a fit about the speed of their actions.

Other highlights of her recent comments include:

  • “At this time — we’re in a dramatic crisis — euro bonds are precisely the wrong answer.”
  • “They lead us into a debt union, not a stability union. Each country has to take its own steps to reduce its debt.”
  • “Politicians can’t and won’t simply run after the markets.”
  • “The markets want to force us to do certain things. That we won’t do."

Cullen Roche, from Pragmatic Capitalism, says: if you’re a market speculator you can basically read her comments as such: “We are in no rush whatsoever to solve the crisis in Europe. We will not be swayed by market crashes or panics.” Interesting, because the markets are sending them a very clear message. There is a very serious risk of a banking crisis in Europe.


It's Not Just Europe.

110821 world-indexes sell off The world continued its sell-off last week.  The table on the right shows the damage done to seven major markets.

The DAX was the biggest loser, down 8.63%. It's also the index that has slipped the furthest into bear territory, down 27.20% from its interim high set on May 2nd.

In fact, five of the seven are now in cyclical bear territory, down 20% or more from their interim highs: The DAX, Nikkei, Hang Seng, Shanghai, and the BSE Sensex.

The FTSE and S&P 500 remain above the traditional bear boundary, vying for the dubious designation as top performer during this world-wide correction.


How Do The Moves in Once Country Compare to Others?

Here is a chart, from Doug Short, showing the comparative performance of World Markets since March 9, 2009.


110821 world indicies since 090309 

It has been a tough few weeks for just about everyone. 

Laszlo Birinyi adds that stock correlation is also soaring. The average 50-day correlation of S&P 500 members to the index has risen to the highest levels since the market bottomed in 1987.


110821 Stocks are Correlated Now Too 
Are 'fat tails' are more likely to happen at the end of a crisis? If so, we might see a bottom soon.  It bears watching to notice which sectors will break out as new leaders.


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