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Market Focus Still On European Debt Crisis.

 September 27, 2011 02:44 PM

The U.S. market continues to rise and fall on a daily and weekly basis with the rise and fall of concerns over the euro-zone debt crisis. A big plunge last week when a default by Greece was seen as imminent, then a big rally yesterday on news that another rescue agreement is imminent.

Meanwhile, economic reports continue to show the U.S. economic slowdown of the first half is still worsening, unrelated to the euro debt crisis, even as we are about to enter the 4th quarter of the year.

[Related -Bond Yields Rise On Stronger Economic Data]

A default by Greece would certainly worsen the problems of European banks and exacerbate global economic problems.

But, would preventing the default halt the economic slowdown in Europe? That slowdown was created by the austerity measures (government job lay-offs, cutbacks in services, increased taxes) implemented in Europe to tackle the high government budget deficits?

Would prevention of euro-zone defaults halt the economic slowdowns in Asia, Brazil, and other parts of the world that are the result of those countries taking aggressive measures, raising interest rates and tightening monetary and fiscal policies, to slow their growth in an effort to tackle sharply rising inflation?

Would solution of the eurozone crisis reverse the economic slowdown in the U.S.? Would it have people rushing out to buy houses and cars, reverse plunging business and consumer confidence about U.S. business prospects, and general concerns on Main Street that U.S. policies are headed in the wrong direction?

[Related -Apple Tops Low Expectations]

You would think the answer must be yes, from the way global markets are moving in relief so far this week.

Even markets in Asia, which had plunged further Sunday night on continuing concerns about the global economic slowdown, rallied strongly last night in apparent reaction to the rallies yesterday in Europe and the U.S.

Hong Kong closed up a big 4.1%.



To read my weekend newspaper column ‘What If You Don't Have A Five-Year Investment Horizon?' click here!

Yesterday in the U.S. Market.

The extreme volatility continues. After closing up hugely week before last, and then being smashed last week, the market was back to the upside by double-digits yesterday. Volume was again light, with only 1.1 billion shares traded on the NYSE.

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