The Stock Market Has Finally Responded To The Risks In Europe

This article reports on the stock market sell-off. Many were wondering why the problems in the eurozone were not being discounted by equity investors. Uncertainty about the ability of the political systems in Italy and Greece to deal with their problems led to a spike in interest rates and this triggered the sell off. The ECB has purchased Italian bonds but it has been a drop in the bucket. The ECB does not have the capital or the political support needed to halt the decline in the price of Italian debt. The risk of default by Italy will also affect the banks that hold Italian debt,