Sunday, August 7, 2011

Double whammy: US debt downgrade and financial stability of Italy both on the table for Monday's markets!

US debt downgrade by S&P is a big story, but the turmoil surrounding the financial stability of Italy is potentially even bigger!

The story getting the most press is of course the US debt downgrade by S&P late Friday.

While this has the potential to roil the markets Monday and impact the US economy and consumer in ways we are not sure of yet, the crisis in Europe surrounding the stability of Italy along with questions concerning the participation of Germany to bail them out might be even bigger.

If Italian bond yields continue to rise and the EU does not conduct open market purchases of that country's debt to try and keep Italy's funding costs down and restore some semblance of confidence, the crisis could spiral out of control and take the EU down with it.

The European Central Bank is holding an emergency conference call today to determine what to do or what not to do.

The markets on Monday will of course be the final arbiter of the decision that it makes!

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