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This is how it works. When markets are up, people find positive stories to talk about.When markets are down, people focus on the negative.
The point is: Markets lead the narrative, not the other way around.
Hence, people are talking about some gloomy things.
SocGen FX strategist Sébastien Galy lists several things to worry about in a note tonight.
- The ESM (European bailout fund) doesn’t work. It makes sovereign bondholders less senior, and therefore is toxic.
- Greece is about to have a potential “cliff-jumping” event, in the form of its election coming up on Sunday.
- There are leaks coming out from the EU about imposing capital controls in Europe post Grexit. Not helpful.
- A major downgrade of the US financial system could come any day now. Banks are getting pummelled.
- There are some worries about Switzerland holding the line on the EURCHF floor.
Note that these are all acute things. Other worries like the US fiscal cliff and the Chinese hard landing are bigger issues. Also unmentioned is any spillover into Italy, which has mostly enjoyed calm the last few weeks.
Says SocGen’s Galy: “It all feels very early 1980s when police would stop folks carrying suitcases of cash into Switzerland.”
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