Concerns about the sovereign debt difficulties of Greece has raised the market's awareness. If this is a global problem, who is going to be in charge of the bail out? As far as debtors go, Greece is a piker, but look at the problems that bail out is causing. Give them €100B and they riot. Raise the ante to €150B, and tell the Greek bureaucrats they must take a pay cut and they schedule a new riot.
As the government borrowing cost soared for Greece and started to work higher in Spain and Portugal, it was obvious more had to be done to defend the euro. The division between the frugal northern Europeans and their spend thrift Mediterranean partners was great. According to Spanish reports Sarkozy told Germany's Merkel that she had to get aboard the bailout plan or Sarkozy was going to cash in his euro's for French francs and go home. This threat, along with pessimistic comments by euro doubters such as Paul Volcker, had made many question weather the euro will survive.
Government needs to finance their bloated size and cost is not confined to just a few borders. It is estimated that the Europeans need to borrow €2T in the next three years to retire maturing debt. The US Treasury will need to borrow $1.5T this year for ongoing operations. There is real fear that the private sector, where job creation begins, will be crowded out, unable to borrow. In this environment, market psychology counts for a lot more than economic reports.
Disclosure: no equity positions