Photo: markusram via Flickr
Markets were jittery early yesterday when investors started to lose confidence in the outcome of the highly anticipated EU leaders’ summit, which is scheduled for Sunday October 23.But markets rapidly rebounded when European leaders announced they would hold a second summit where they would agree on a “comprehensive and ambitious” solution to the eurozone debt crisis.
However, Deutsche Bank’s Jim Reid was surprised by the market’s late rally. He thinks these delays signal a watered down eurozone crisis solution:
A joint statement by the German and French governments last night indicated that Sunday’s summit is now expected to be an “in depth” discussion session before a final agreement at a second summit on Wednesday. A senior German official told the FT that “there will be no agreements” on Sunday and “this will now happen Wednesday at the earliest”. French officials told the FT that the second summit could be happen before Wednesday. Either way, EU leaders seem to need more time. It does seem that problems have emerged over the last 48 hours that are increasingly looking likely to mean that the eventual plan is less aggressive than expectations that have been built up over the past couple of weeks. We would have been more surprised that markets haven’t reacted more negatively to the disappointments had we not spent most of the week touring Brussels and Spain. We thought we’d find clients more optimistic but it was clear to us that their expectations are fairly low for an effective lasting package. So there’s been less room for a sell-off as the news flow has become more concerning re the upcoming package.