European markets slide as euro fears remain

Equity markets across Europe continued to slide following yesterday’s falls as fears remained over the effectiveness of the Irish bailout and growing fears over the geo political risk emerging in the Korean peninsula. Despite details finally emerging over the weekend that Ireland needs and will receive assistance from Europe, concerns intensified over the political fallout that could derail any bailout timeframe. Unsettling comments from Irish minority parties that they are unwilling to back an austerity budget, a prerequisite of receiving emergency funds, throws the Irish situation further into turmoil. Investors have been yearning for clarity and direction and if anything, the politicians and policy makers are compounding an already precarious situation.

Financial shares across Europe took the brunt of the pain, with investors wary of the two part-nationalised backs in the UK. RBS and Lloyds’ high degree of exposure to the Irish banks has been forefront in the minds of investors and they are voting with their feet. RBS trading down below 39p and Lloyds heading back to early summer levels, UK banks were among the biggest fallers in a morning that saw the FTSE give up another 40 points.

As if the Irish woes and escalating fear over possible contagion were not enough, developments in the Korean Peninsula have unsettled Asian markets. Global equities suffered over the alarming developments between North and South Korea, investors shunned equities and sought solace in the relative safety of the US dollar and precious metals. Amid such a volatile climate investors will be watching carefully to see how the US and China will react to the ever deepening tension between the two countries.

Traders will also be mindful that a glut of US data is soon to hit the wire ahead of Thanksgiving, with US GDP first up at lunch time. Investors will hope that a strong number from across the water can assure markets that the biggest global economy is steadily on the road to recovery. If so, the problems in Europe and Asia could take a back seat and a much needed relief rally could be on the cards. Any indication to the contrary would further compound investors sentiment and could yet see us retrace further gains of the late summer rally.