Instead of garnering more confidence, the European bank stress tests spurred more concerns. This is not because only 8 banks failed, but more due to the reality that has been mostly fully revealed that banks not only have large sovereign holdings of iffy credits but also have huge exposure to the private sector of each of the troubled economies. European banks across the region are trading lower as they first respond to Friday’s release. Since gold really is money, it is touching $1600 for the 1st time on euro concerns and yields in Italy, Spain, Greece, and Portugal continue to go parabolic. Irish bonds are little changed today. The cost of insuring against French debt is now higher than Columbia, Mexico and the Slovak Republic. European officials hope to have a Greek deal by the end of the week but Trichet reiterated that the ECB won’t accept defaulted bonds as collateral for funding.
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