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European Crisis Weighs on Investor Sentiment


Just when it looked like we turned the proverbial page on market focus, the Europeans come fighting back and reclaim their hold over investor psyche with a swirl of Monday morning news impossible to ignore. Of course, helping their case for returning to the spotlight is the fact that the most important event on the U.S. calendar this week is Veterans Day on Friday, when a closed bond market will embarrass an open stock market once again.

Compare that to the drumbeat of madness occurring in Europe right now, where there is a distinct possibility that Greece and Italy are both about to imminently replace their embattled prime ministers, as well as a continued stream of not-so-subtle economic reminders that all but ensure a recession for the European Union. Germany's latest plunge in Industrial Production for October was the worst in two-and-a-half years. For those who have been clinging to a north-south economic divide in Europe, the slide of the Deutschland data shows the contagion effect is no longer the exclusive worry of the bond market.

Of particular concern to Macke, as he points out in the attached video clip, is Italian Prime Minister Silvio Berlusconi's chosen form of communicating to his nation via Facebook. This, after widespread rumors of his resignation were fueling markets across Europe today, until the media-mogul closed down the speculation (at least briefly) with a status update on his home page.

In the meantime, crude oil at $95 a barrel continues to defy the economic story that has crippled copper, while 16% earnings growth for the S&P 500 in Q3 appears to have built a floor in the market where once hung a ceiling. While Europe's dirty laundry is on display for the world to see, the key theme domestically will be holding on to the ''1250'' level, and resuming the rally that put October in the record books.