All major stock markets broke their recent rallies yesterday and precious metals rose to a one-month high as it became clear that Germany was unwilling to pay the bill for an effective eurozone crisis deal.
First a meeting of finance ministers scheduled for today was cancelled and matters kicked upstairs to the leaders of the 27 EU members and 17 euro states. Then it became apparent from officials that Germany is the stumbling block to an enhanced role for the ECB in guaranteeing sovereign debt.
The German parliament is about to pass a motion explicitly ruling out the buying of more debt by the ECB. By blocking this action the Germans are surely going to tip Italian bonds over the edge with a huge spike in yields. They are already perilously close to the key six per cent level.
German angst
It remains to be seen what face-saving package the EU leaders can put together tonight. But it appears we are back where we started. EU officials are right the Germans will not support these measures until they have seen the crisis, so we will now get one.
How long will the markets give the eurozone after this political failure? The reaction should be almost instant and we only saw a first glimpse of the sell-off yesterday. Markets that are disappointed can get very nasty.
Gold and silver proved an instant winner with $1,715 and $33.10 an ounce one-month highs. Whether that can be maintained in a true sell-off is less likely as precious metals tend to get sold down with everything else in a real rout like in 2008-9.
But that much could be different this time.
NB : directed from link : http://www.arabianmoney.net/gold-silver/2011/10/26/stocks-fall-gold-and-silver-gain-as-germany-rejects-eurozone-crisis-deal/
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