Looking at the markets with a fresh set of eyes, one thing seems clear to me: the rally that began Sunday night in Asia was not driven entirely by hopes for a European debt solution. Contributing as much or more is the realization that the world’s largest economy is not tumbling headlong into recession as feared little more than a week ago.
The combination of hopes that Europe will deliver down the road (a dubious assumption) and the realization that the US had a really weak August but an only tepid September and October have helped spark a massive short-covering rally in the risk trade.
Europe has a serial problem of over-promising and under-performing, so be careful about trading off of European hopes, on the long-side.
UPDATE..I left a critical “not” out of the second sentence in the first post.
