European Stocks, Italian Bonds, and Leadership Transitions
Continuing today, U.S. financial stocks continue to track European stocks, and as Italy's bond interest rates continue to rise, the risk of bondholder losses follows; the trajectory then causing financial stocks values to fall.
Long term, orderly governmental leadership transitions are underway in Greece and Italy, as both countries also continue with the approval of sovereign debt plans. Greece is scheduled to announce today an interim government at about 10am EST. As Italy prepares an interim government, the country's foreign debt levels are under control and the population has meaningful savings accumulated; however achieving economic growth and confidence, and following governmental law are two significant challenges the country faces as it adopts the eurozone plan of October 24. A second long-term observation is the economic recovery plans in Ireland, Portugal, and Spain. And, U.S. economic growth is also very important to a global recovery, with the U.S. Congressional Super Committee scheduled to announce U.S. deficit and budgetary remedies on November 23.
While the temptation is to focus on day-to-day market movements, these movements react to forecasted long-term developments.