U.S. futures were down sharply this morning as the proposed Spanish shell game we discussed yesterday was denounced as a 'no go' by the ECB. Despite yesterday's equity rally the dollar did not budgt nor did bonds. In fact U.S. 10 year bond yields were below 1.7% this morning. Then this morning at 7 AM a news report hit that the EU executive arm could 'envisage' a banking union. Futures ripped higher by nearly 1%, although some of that knee jerk reaction has been given back in the past 15 minutes. Which shows why this environment is very difficult for both shorts and longs – at any moment an intervention rumor can be started and simple proposals can move global markets 15%. A blurb from the WSJ
The 17 countries that use the euro should consider setting up a "banking union" that allows them to share the burden of bank failures, the European Union's executive arm said Wednesday in a report on the currency union's crisis-fighting efforts.
To further stop expensive bank bailouts from pulling down governments' own finances, allowing the euro zone's new rescue fund to directly boost the capital of banks "might be envisaged," the European Commission said.
At the moment, any financial aid to prop up struggling banks would have to be requested by the firms' own government.
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