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It sometimes is a small, unpredicted event that moves markets. Today it was Jean-Claude Trichet, the president of the European Central Bank. He unexpectedly left a meeting in Australia to attend special meeting of European leaders to address the region's economy.
That was the trigger that shot off a turnaround in world markets. Stocks and commodities are trading higher in anticipation that the Greek sovereign debt problem will be dealt with. The U.S. market, just opened, did it with a bang as the Dow industrials more than recovered its triple digit loss from Monday to be back above the 10,000 mark.
Yields on Greek, Spanish and Portuguese sovereign debt fell sharply. The yield on 10-year Greek debt fell 50 basis points to 6.3%. The spread between German and Greek bonds fell to 320 basis points from 400 basis points.
The next few days should clarify whether the EU will come to the aid of the weaker countries. If not, look for the downward trend to continue.
This whole issue demonstrates how sensitive the markets are these days. Just a whisper here and there kicks off a turnaround. The stakes here are high. The European Union with its single currency was to be the showcase of Europe. If a deal is not forthcoming, the whole fabric of the EU could unravel.
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