Leading bourses across Europe are soaring after a debt deal that, while not perfect, is more satisfactory than thought.
After hours of talks that started Wednesday evening and wrapped up early Thursday, European officials announced the following:
1) a plan under which private investors will take a 50% write-down on their holdings of Greek debt (compared to 60% sought after)
2) the firepower of the euro-zone bailout fund will be increased to around $1.4 trillion
3) European banks will be recapitalized
While we have made a strong case that the long-term solution to too much debt is not more debt, quantitative easing (QE) has had a powerful bullish effect on markets since March 2009. The two times QE ended in the U.S., the markets struggled. The U.S. Federal Reserve is now on QE3 or a stealth form of it as the U.S. markets have bounced straight up from their lows while the European Central Bank and Bank of England have also increased the scale of their QE asset purchase schemes. The ECB has agreed to around $1.4 trillion euros and the Bank of England recently increased theirs from £200bn to £275bn.
IWM (Russell 2000)
SPY (S&P 500)
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TNA (Russell 2000)
UPRO (S&P 500)
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