Monday, August 15, 2011

Franco-German summit in focus - Traders said that a public holiday in Italy – the source of much of the fear that swept markets in recent days – had helped to steady investors' nerves. However, the picture could change on Tuesday when Nicolas Sarkozy and Angela Merkel will hold crucial discussions on the future of the eurozone. The talks, taking place in Paris, will consider how the two biggest eurozone economies can prevent the region's debt crisis escalating further. Failure to agree clear plans could prompt another sell-off in the financial markets, traders believe. "If nothing is agreed tomorrow then we could see another market wobble," said Michael Hewson, analyst at CMC Markets. "I'm afraid we'll see more delays and more prevarication … and the markets are losing patience." One option to resolve the euro crisis would be for weaker countries to issue "eurobonds", backed by the rest of the community. France and Germany, though, have indicated that eurobonds are not on the agenda this week. Hewson warned that the financial markets are currently "in the eye of the storm", suggesting that Monday's placid scenes may be short-lived.

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