Investors are expecting an eventual reduction of support by the Fed, and Merkel winning the election this weekend. However, what stock markets have not priced in is the resurgence of Eurozone troubles into the headlines. So what are the options, why is this important and how will this effect markets?
You can be confident that markets will slump again and Spanish and Italian borrowing costs will rise again as soon as investors realize that Draghi, despite his best intentions, can't quite deliver. His bank's board is due to meet Thursday, and the Germans remain adamantly opposed to allowing Draghi to get serious about bond purchases. Draghi, like Bernanke, keeps warning that central bankers can't fix the economic mess by themselves. Europe needs to reverse its austerity policies, to take shared responsibility for dealing with the legacy debt of its weaker members, and to turn the ECB into a true central bank. None of this is likely to happen.