Germany against shot down the possibility of Euro bond and bigger role for ECB to resolve the EU debt crisis and US super committee unable to pen out a deficit reduction plan with the usual political reason. Those were the 2 issues that occupied investors' mind regarding the stock markets and with no surprising, stock markets globally reacting to those in a downbeat sentiment. Global stock markets almost gave back all the gain they earned last month when EU made a small positive step in resolving the debt crisis.
US failure to come out a long term debt reduction plan was not another fearful incident as in August as they have auto reduction mechanism to be kicked in from 2013. Unless the Congress block those auto mechanism if not the debt of US will still get to reduce probably on a slower pace than with the debt reduction plan.
For Europe, same old story, nothing changed and not much progress also since the EU Summit last month. Leaderships changed hand in Greece, Italy and Spain during these periods. Furthermore, borrowing cost in France and lastly Germany also started to drive up in fear of the crisis spreading to the more powerful EU countries.
Investors will be looking towards the 9th Dec EU Summit to see what the EU leaders have in mind after that little positive small step in Oct. What most investors wanted of Euro bond and bigger ECB role all being shot down and resisted by Germany and with no surprise, that will not happen in the coming EU Summit. EFSF now is the only way apart from respective countries implementing strict austerity measures to cut their debt to tackle the debt. More technical detail on the EFSF ( which was proposed to enlarge in Oct EU Summit ) has to be surfaced to ease worries and concerns of investors.
On a wider scope, next March would be a better way to gauge to global economy status. Then we could see the full year 2011 GDP of all the countries. How serious the EU economy condition, how sever is the recession if they do get into one. How US growth like and how much will it be affected with the condition in Europe. China whether will it get into hard or soft landing. It is then probably the Central Banks will have a clearer picture of the economic condition and make decision whether to act or not. US Fed will be looking closely and if condition allows for a stimulus, it should roll out. China if going for a soft landing and inflation cooling down further, it will also roll out stimulus package to cushion the slower growth. ECB probably will continue to reduce interest rate and continue buying of Government bonds. Thereafter, stock markets could eventually hit the bottom or commence on another new downtrend depends on the condition of the economy and actions by country leaders.
