"The situation is increasingly reminding us of August/September 2008 when the credit market was sending out a strong sell signal to the equity market. Failing a quick sovereign bail-out, the credit markets (through peripherals) are sending out a similar sell signal.
In reality it seems that the market wants to accelerate an issue that the authorities were hoping that time would heal. The likelihood is that the EC will be forced to show more of their hands over the coming weeks or months. If a bail-out comes it may push out the problem and lead to a risk rally but this sort of risk will live on for many years around the Developed world until we see a combination of strong growth, big FX moves (a zero sum global game), higher inflation and/or Sovereign defaults."
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