Hope and fear continue to do battle. Hope that global growth, led by the largest economy in the world, the US, is slowly recovering. Fear that Europe remains in crisis, with a series of credit downgrades looming. As a result, markets remain choppy, with headlines still dominating market direction, resulting in wild swings in ever thinning pre-xmas markets.
But the European crisis remains paramount, as leaders across Europe continue to bicker. The bond auctions last week actually went better than expected. Spain saw solid demand, paying more than 2 points less to borrow over 5-years than Italy, as budget cuts helped ease concerns it could be among the next to fall in the euro zone's debt crisis. Any positive thoughts remain transient however, as the rating agencies continue to cast gloom.
Fitch Ratings said that it thought a comprehensive solution to the euro zone's debt crisis was beyond reach, at the same time putting 6 euro zone economies including Italy on watch for potential near-term downgrades. Standard & Poor's has already warned 15 of the 17 Eurozone members they were close to a downgrade. So fear remains palpable, as markets await the actual downgrades, which could happen anytime.