Just when the market is going all Weimar Republic with it's inflation based US dollar going down the toilet stock-rallies. It's currently (until the US backlash against the Federal Reserve/Ben Bernanke gathers steam) all about Ireland and the the Euro Zone, with CDS spreads widening further: @Ireland's five year sovereign CDS widened 17.5 BP to 605/615 BP. This if course put selling pressure on the EUR and drove down Europe's main indexes.
This is mild risk aversion. Greece is still doomed, but it's ecomomy is no where as close to Ireland and Spain that have being fed by the Europe Central Bank. Greece so far is the only country to tap into the 1trillion EZ bailout fund, which I think appalling, as German is the economic backstop for the fund (Germany now seeks to restructure fund/clauses/approach for any future bailouts).
Recently Greece's socialist government narrowly gets back into power, the bond markets will again be watching to see if they can still budget in austerity measure, which will be impossible. Greece will eventually default, as will Ireland and Spain. The CDS market and the bond markets have still priced in a major EZ default.
Ireland may be tested with a form of sovereign debt restructure rather than a Greek style bailout. If this is the case, any major risk aversion will correct 'overbought' markets end 2010 and into next year 2011
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