Europe, once again, missed a chance to calm markets by performing a stress test worth being called so. Due to serious doubts about the “stress” scenario in the test, - which does not factor in the European debt crisis incl. defaults - the EBA provided serious reasons to speculate about the health of the European banking system. Numbers as high as 80 bln € of short of funds in a tougher test are swirling around. Nothing really helpful as Europe is still unable to come up with a solution for the debt crisis with politicians still focusing on Greece while they may miss the much bigger danger in form of further contagion to Italy & Spain.
Also the US have been unable to solve their debt ceiling issue with Democrats & Republicans still gambling with fire, heavily underestimating the consequences this behavior may cause.
Consequently, Gold –the last really safe heaven – gained for the 11th session in a row, last time this happened was Aug 1970!!!!
Interestingly, Equity Markets seems to be still less skeptic then Bonds & CDS with the spreads of last named widening further and also FX Markets as the Swiss Franc is gaining further.
So everything is showing stress with further downside potential, everything but equities. I can t believe that equities are right this time against the rest of the world, as it wld be the 1st time this wld happen. Consequently we still like being hedged and strongly advise to not selling fat tails on the downside!