A Destabilized Europe Will Wreak Havoc On World Markets

A Destabilized Europe Will Wreak Havoc On World Markets

A Destabilized Europe Will Wreak Havoc On World Markets


Central banks continue to give financial markets mixed signals.

New York Fed President William Dudley said it remains a reasonable expectation that the Fed will raise its benchmark interest rate 2X this year.

Mr. Dudley did not worry much about Friday’s employment data

Average weekly earnings growth rose Y-Y from 2.3 to 2.5% and the employment trend in the US is still intact.

Chicago Fed President Charles Evans said the US economy is on pace for growth of 2.5% over the course of Y 2016 while the most important fundamental is the improvement of labor prospects.

In Japan, the minutes of the BOJ 14-15 March Monetary Policy Meeting show that a number of members of the Bank of Japan (BOJ) are concerned that the negative interest rate might have fueled unrealistic expectations about further easing.

There are comments about the difficulty of understanding the negative rate policy.

Crude Oil price has been rising in the wake of devastating wildfires in Canada and halting Oil sands production in the region

Take Note: less than 50% of the decline in the Crude Oil price was passed onto consumers in OECD countries because of a combination of taxes and in some markets increasing labor rates, which blunts the effects of the pass-through of changing Crude Oil prices.

The London Mayoral election showed a significant increase in turnout coming in at 45.3%, which was 7.2% more than the 38.1% turnout in Y 2012 for the somewhat ceremonial post.

But it is significant in that it shows the population of London to be politically engaged ahead of the June referendum on UK membership of the EU.

Past polls have shown that London is by quite a large margin the most pro-EU part of the UK.

The leaders of the “no-campaign” that favor leaving the EU suggest that in the event of an exit, the UK would not seek to be part of the single currency market. This is classified by economists as the hard-exit scenario.

A recent opinion poll indicated that no-supporters were motivated by immigration issues, not by economic issues, while yes-supporters prioritized economic issues above other factors.

The Greeks are again waiting to hear if the get another distribution of largesse from the IMF and the Eurogroup.

Sunday night, the Greek Parliament passed more fiscal tightening measures including pension and tax reforms to meet the basic requirements, but the IMF has been mustering about additional contingent measures and as Managing Director Christine Lagarde explained in a letter to Eurogroup in the event that the Greek government fails to meet its targets. There was rioting in the streets of Athens.


Given the politics around the refugee crisis in Europe there is perhaps a desire to keep Greece off the front pages of the newspapers of the continent, but the IMF is less swayed by such matters that is the Eurogroup.

Market investors should be on keen alert about Greece because we may see the EU again become a serious source of multiple uncertainties related to:

  1. The ongoing Greek debt crisis.
  2. The ongoing refugee crisis; there is no workable solution yet.

If any 1 of those challenges should turn out not in a way as is at present hoped for by the overall majority, then look for serious spikes in overall financial market volatility, that includes sharp rises in the prices of Gold and Silver.

Monday’s US major stock market indexes finished at: DJIA -34.72 at 17705.91, NAS Comp +14.05 at 4750.21, S&P 500 +1.55 at 2058.69

Volume: Trade was above average with about 941-M/shares exchanged on the NYSE

  • NAS Comp -5.1% YTD
  • Russell 2000 -1.5% YTD
  • S&P 500 +0.7% YTD
  • DJIA +1.6% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (0.15) Neutral (0.01) Neutral (0.11) Bullish (0.33)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Neutral (0.23) Neutral (0.01) Bullish (0.28) Bullish (0.39)
HeffX-LTN Analysis for QQQ:  Overall Short Intermediate Long
Neutral (-0.13) Neutral (-0.10) Neutral (-0.11) Neutral (-0.19)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.47) Bearish (-0.35) Very Bearish (-0.56) Very Bearish (-0.50)

Stay tuned…

Paul Ebeling

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