May 25, 2010
Spain Concerns, War Threat put Global Markets under Pressure
Global equity markets fell sharply lower overnight on renewed fears in the Euro Zone and rising tensions between North Korea and South Korea. The sell-off started early
when Asian traders began liquidating equities on war concerns between the Korean nations and quickly spread to Europe and the U.S. as these two regions continued to struggle with the spreading debt
issues in the Euro Zone.
Comments from the International Monetary Fund helped accelerate the decline in European markets. On Monday, the IMF warned that Spain must do more to accelerate the
consolidation of its banking system and to overhaul its labor laws and government pension systems. Despite remaining upbeat about the soundness of Spain’s banking system, traders read this comment as
a negative and began selling equities while seeking shelter in lower yielding currencies.
On Monday, the June E-mini S&P 500 tried, but failed to confirm Friday’s closing price reversal bottom. This failure helped set up the overnight decline because it
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