Analysts prognosticate tough summer remains for markets
By Sophie Devillier, AFP
July 16, 2012, 11:40 am TWN
PARIS -- Despite making progress, the eurozone debt crisis remains unsolved and, in a repeat of last summer, could still bring nasty surprises to global stock markets in July and August, analysts said.
In measuring up the coming summer weeks, "market sentiment is extremely negative," said Alexandre Hezez, a trader at asset management firm Convictions AM.
With many investors on holiday, trading volumes plummet in July and August which makes for even bigger swings up and down, analysts warned. The Paris stock exchange plummeted 18 percent between July 1 and Sept. 1, 2011.
Since then, eight summits, a budgetary pact, a new rescue fund and more than 1 trillion euros (US$1.22 trillion) injected by the ECB into the struggling financial sector have failed to end the eurozone debt crisis.
Last summer Greece sparked panic, but concerns for Athens have receded to the background after parties wanting the country to remain in the eurozone won an election in June.
Now Spain and Italy are riling traders, with sovereign borrowing rates for both countries spiking to unsustainable levels on the secondary bond market.
"The end of July and the month of August could be very intense," warned Jean-Francois Robin, an investment strategist at Natixis.
"If the Spanish 10-year bond yields spike to above 7.5 percent, Madrid will undoubtedly be forced to call for direct international aid from the new EU rescue fund that is a long way from being ready," Robin said.