The Spanish IBEX, lower by 2.4%, ended just 1.3% above its March ’09 closing low and 3.1% above its intraday March ’09 low. The Italian MIB closed at the lowest level since Nov. Italian CDS is at a 3 month high, Spain is near record highs at just shy of 500 bps and France is trading at 3 month highs at 200 bps, in line with Russia and only 15 bps away from Kazakhstan. In any market analysis of the stress in Europe and employment issues in the US, every conversation comes back to when will central bankers act. What amount of pain and distress needs to be felt before more policy action is taken is the $64k question for investors IF things continue on the current path and knowing that the current batch of central bankers have trained the markets to expect more? What is the strike price of the central bank put now? In Europe, we know Germany will wait as long as possible and in the US, previous action came only after double digit declines in stocks.
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