Euro-zonked

Well, so much for that. The FTSE 100 fell as much as 1.7 per cent this morning, while overnight the euro and Asian stock markets tumbled, after Europe’s leaders announced their grand 2-trillion-euro plan over the weekend to drag the Eurozone out of the mire. It appears the markets are well past the point of believing that political leaders can get us out of this mess. The consensus is that the plan is not concrete enough.

Of course, equities may recover a bit later, as they have been prone to do in past days. But the whipsawing itself is the worst sign of all; stock investors and retail-end funds are confused, panicky and probably still in denial. The thing to look at is liquidity, at interbank lending and the institutions that are most sensitive to credit crunches, and here the indications have been dire for weeks.

Credit default swaps on Morgan Stanley
shot to a two-year high on Friday.