Here we go again (ISFM) (10-01-2011)

Now don’t tell me this was unexpected: Portugal is coming under mounting pressure to accept an aid package to prevent contagion to other countries, which has resulted this morning in sharp falls for the region’s stock markets, while borrowing rates have shot sharply higher.

Recent history seems to be repeating itself, after the bailout of Greece and Ireland, although, true to form, Portugal denies it needs a bailout; meanwhile the yield on Portugal's ten-year bonds is up by nearly half a percentage point to 7.14 percent. Ahead of a meeting of euro zone finance ministers nest week, come several bond auctions, in Portugal, Spain and Italy and investors are eyeing these with understandable trepidation: if Portugal receives aid and Spain is next, the market view is that the limits of the existing bailout fund will be severely tested, auguring bad news for the euro, as the economy of Spain comprises a large chunk of Europe’s economy. Naturally, the common currency lost ground, retreating to $1.29, or around 5 cents so far this year.

Earlier in Asia, most markets were lower, as concerns about monetary- and property-market tightening combined with weak reports from the U.S. causing investors to sell more than buying, with Indonesian, Chinese and Indian stocks among the worst affected. Financial markets in Japan were closed Monday for a national holiday.

On Wall Street, U.S. stock futures were pointing lower after a low ending last week on due to the fairly disappointing U.S. jobs report for December. The pace of the U.S. economic recovery has been the main focus of attention so far this year and will continue to affect investor sentiment this week alongside developments in Europe's debt crisis.

Source: ISFM