European Banks are holding billions of dollars of government bonds and investors are concerned about the future value of these assets if governments fail to pay their debts to the banks. French Banks could be the worst affected and are already the potential target of reduction in their credit rating. European officials say that the banks have sufficient capital but investors don't share their confidence.
On Thursday Obama's speech did little to reassure investors and was followed with the news that Jurgen Stark, a member of the European Central Bank had resigned providing further concern in the ongoing European situation.
The S&P 500 has ended lower five times in the last six sessions and had its sixth weekly decline in the past seven weeks. The index currently sits 16% below its high of the year and 4% above it's low of the year.
Mark Goodman, a Senior Broker at Lloyds International in Brazil says "One of the only gainers was the Volatility Index which was up 16%. This shows how worried investors are about the stock markets and with good reason, the European situation has the potential to do widespread damage. I am putting my clients heavily into Gold, we are buying on the dips and biding our time to sell when we see a sharp increase in the price as the European situation continues to decline"
Gold reached a record $1,923.70 an ounce on Sept. 6 and is up 31 percent this year driven heavily by worry about the European sovereign-debt crisis not to mention fiscal woes in the world's biggest economy, the U.S.
Treasuries were overbought driving the yield on the 10-year Note to a record low of 1.90% down from recent highs of 2.30%.
John Logan, Director of Institutional Trading at Lloyds International is no more positive on his market outlook for next week. "The week ahead looks just as dismal. Stock futures have fallen almost 1.1% and this is a sign that we are due to see further losses in the S&P 500 when it opens on Monday morning"
Rick Amory, Mark Goodman and John Logan will be attending the Latin American Investment Forum at the InterContinental, São Paulo in Brazil between December 12-13. For further info contact RIck or Mark at Lloyds on +1 866 978 7654 or visit http://www.lloydsint.com/
You can register for the forum at http://www.opalgroup.net/
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Commodity trading services to clients in over 60 countries. Lloyds International offers a state of the art trading platform to each of our clients from our offices in Brazil and Costa Rica. FInd out more about the Lloyds advantage http://www.lloydsint.com