European Central Bank President Mario Draghi knows how to influence markets, and so he did last week. After months of staying out (some would argue intentionally absent), he stated the ECB would do whatever it takes to save the euro. He had similar effects the previous few times he spoke or acted (LTROs, etc.). The read more

The volatility of the last few months made many people believe 2012 would be a repeat of 2011. We do not see much value in looking for insight about the future in past patterns or charts. A lot has changed since last year, though the main risks remain the same. We believe the risk distribution read more

After more than 2 years of the euro crisis coming and going, something of a catharsis is possible with the next Greek elections and its potential exit. The Spanish bank bailout announced over the weekend is part of the effort to isolate the rest of the Eurozone from a potentially very negative shock. Markets clearly read more

The probability that Greece is out of the euro in the next 2 months has increased to high levels. The risk of contagion to Spain and others is significant. This is clear to EU policy makers, which means they ought to be thinking about the response, which in this case needs to be a big read more

The elections in Greece and France have brought yet another bout of euro crisis. It had been so far a game played between policy makers (EU, ECB, IMF) and markets (especially bond markets), in which policy reacted with bailouts and political agreements to every bout of market pressure. There is a new player now, which read more

There are clearly three main drivers in today’s markets, which explain the recent volatility and lack of direction. The three factors are: the slowdown in China and fears of a hard landing; the US business cycle; and, crisis flares from the Eurozone periphery. To some extent these show the market is addicted to extravagant Chinese read more

Markets in March seem directionless, confused. There are a few important issues that provide reason for caution. None of the issues that cause concern are new. Last week the Fed decided to provide its first signal that it could rid markets from its ‘training wheels’ when it characterize the economic situation as improving, including the read more

Last year’s volatility was mostly due to the euro crisis, though there were other shocks (especially oil during the first quarter). The euro crisis is not over, but most likely its potential for contagion has been minimized significantly by the actions of the European Central Bank (ECB), which we had highlighted as the key pillar read more

Despite Hungary not sharing the euro, what the EU does about Hungary should have very relevant implications for the euro and the credibility of the reforms Merkel and Sarkozy are trying to implement. Hungary is not only in the middle of mini fiscal and political crises, but is potentially the most recent and clear-cut test read more

A few weeks ago we wrote that only when the European Central Bank did get seriously involved in the markets, the crisis management scheme would be complete. Last Wednesday the ECB did provide an unprecedented amount of liquidity to markets through the new 3-year credit line to banks. We see this event as a potential read more