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European Markets, much vertigo for a free fall?

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CAC40, DAX30, STOXX sound very sweet to the ears of optimistic investors. After an excellent year 2013 and a mixed year 2014, 2015 took off with a supersonic bang. Star among the stars, the DAX30 skyrocketed nearly 18 percent in 2 months instead of a mere 2.3 percent  in 2014 after a jump of 23 percent in 2013. The massive quantitative easing (QE) started by the ECB 2 days ago has been the main engine behind the brake-less European financial markets.

It’s so wonderful that it blinded the price each European taxpayer will have to pay for it without any guarantee that the QE will bring the desired outcome. In addition here is the comeback of economic growth, long-awaited since 2008 and the sovereign debt crisis in 2011. A mere 2 percent is enough to delight both politicians and the financial markets. Yet it is barely enough to sustain the ailing and sluggish European economy at its current level. This suggests that the market has yielded again to one of its bad habits: celebrating the positives and ignoring the negatives.

Indeed what can be negative when the majority agreed, contrary to what it said when a quasi-correction occurred in October 2014, that Europe is “the market to be” in 2015. The euro crisis is not over. The showdown between the Eurogroup and Greece, even though the latter will likely be defeated, is the visible tip of a very deep political crisis at the core of which, ignored by politicians, has been melting a huge magma of popular anger whose explosion could happen anytime. In that case, the euro would likely be swept out and the European economy would plunge into the unknown.

Add the crisis in Ukraine, the acrimonious relations between the European Union and Russia, the Islamic terrorist threat, and the cocktail served to investors will ultimately taste very bitter. Icing on the glass, latest economic data has revealed a more serious than expected slowdown of China’s economy. The markets took it as a temporary episode although the fundamentals should encourage them to more caution.

A respiration on European markets would be sane whereas an ongoing bullish trend at the pace recorded since the beginning of the year would be a catalyst for a correction as hard as sudden.


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“The problem with the Ukraine crisis emerged because Ukraine started a rapprochement with the EU in a situation where the EU categorically rejected our arguments about Ukraine’s obligations as part of the CIS,” said Russian Foreign Minister Sergey Lavrov.

The US Treasury Department has targeted an Iraqi airline, a Syrian businessman, and his Emirati company for providing support to a designated Iranian airline.

China and Colombia signed 12 agreements, including deals in infrastructure construction and more cooperation in industrial capacity. Bilateral trade has grown from $22 million in 1980 to $15.6 billion in 2014.

Structural and cyclical policies – including monetary policy – are heavily interdependent,” explained Mario Draghi, President of the ECB. “Potential growth is today estimated to be below 1% in the euro area and is projected to remain well below pre-crisis growth rates.”

China and Brazil issued a joint statement to further facilitate bilateral trade after talks between visiting Premier Li Keqiang and Brazilian President Dilma Rousseff.

Chinese professors among 6 defendants charged with economic espionage and theft of trade secrets from Avago Technologies and Skyworks Solutions for benefit of People’s Republic of China.

No permission will be given to (the opposite party to the nuclear talks) for inspecting any of the military sites as well as for interviewing nuclear scientists and (scientists in) other sensitive disciplines,” said Iran’s Supreme Leader Ali Khamenei.

Have the 4 years since the sovereign debt crisis led to nothing? German Finance Minister Wolfgang Schauble told the Wall Street Journal (WSJ) he can’t say Greece won’t default this time.

North Korea (DPRK) said it can conduct “any underwater operation with world-level strategic weapons capable of striking and wiping out in any waters hostile forces.”

The Office of the US Director of National Intelligence (ODNI) released a sizeable tranche of documents recovered during the raid on the compound used to hide Osama Bin Laden.

Over half the accounts of UK customers of the Israeli contracts for difference (CFD) company Plus500 have been suspended on alleged concerns that the accounts may be used for money laundering.

One more alert after shares in China’s solar energy company Hanergy Thin Film Power Group Ltd. whose meteoric rise had troubled market analysts, nearly halved in value during its annual shareholders’ meeting in Hong Kong.

Patrick Drahi’s group Altice has signed a definitive agreement to acquire 70 percent of the share capital in Suddenlink, the 7th largest US cable operator with 1.5 million residential and 90,000 business customers.

According to a research note released by Deutsche Bank, if the Federal Reserve, led by Chair Janet Yellen, decides to push back an initial rate hike past September 2015, it ultimately could hurt stocks.

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