The FINANCIAL — The Eurozone will once again serve as the source of Wall Street's angst, as investors look to a summit of the region's political leaders for decisive solutions for the ballooning debt crisis, told gulfnews.
Stocks posted their best week in more than two years last week, driven by central bank efforts to provide cheaper dollar loans to struggling European banks.
In addition, the new head of the European Central Bank said on Thursday the ECB stands ready to act more aggressively to fight Europe's debt crisis if political leaders agree to much tighter budget controls at the December 9 summit.
But Wall Street investors can be forgiven for feeling like they've been in this position before. Markets seesawed throughout the autumn, guided by prevailing sentiment out of Europe.Until now, the ECB has resisted prodding from markets and world leaders to step in as the lender of last resort.
European credit market yields have soared in recent weeks on concerns that the Eurozone could break up or one or more countries would default on their debt.
French President Nicolas Sarkozy said he and German Chancellor Angela Merkel would meet tomorrow to outline joint proposals for the summit.
Investor optimism over apparent progress by Eurozone leaders towards taming their debt problems helped propel the S&P 500 7.4 per cent higher for the week, its best weekly performance since March 2009. The best performers in the last week were companies with more international sales, according to Bespoke Investment Group, an investment adviser in Harrison, New York.
While volatility remains high as markets remain susceptible to any negative headlines coming out of the Eurozone, investors appear satisfied for the time being that the region's leaders will remain on track in tackling the crisis.With market swings closely tied to sentiment about the progress made in the Eurozone, investors have been forced to weigh the region's fiscal stability with US stocks that are seen as cheap by many analysts.
Recent corporate outlooks and analyst projections have been painting a less rosy picture, with estimates for fourth-quarter S&P earnings growth tumbling over the past two months as well as a near-record high ratio of negative corporate preannouncements to positive ones, according to Thomson Reuters Proprietary Research.
Even if European leaders continue on a path that investors have cheered, the difficulty in putting plans in place may throw cold water on investor optimism. Borrowing costs in major nations such as Italy and Spain remain at levels considered unsustainable in Europe's slow-growth economy.The US economic calendar for this week is light, with the ISM services report, weekly initial jobless claims and the trade balance among the highlights.
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