Markets Rally On Recap Hopes


Equity markets treated bullish traders well today as news hit the floor that European banks would be recapitalized by the governments of European Union nations.

Earlier this week, fears persisted that Dexia and other major financial institutions in Europe would be forced to go under as their equity value dropped and concerns mounted that they would not be able to sell their debt.

However, late Tuesday afternoon and most of Wednesday, equities rallied several percentage points as several publications noted that European banks would be recapitalized without significant interference from regulators and government officials. The ECB and other central banks will play a critical role in the recapitalization.

“I think that the rumors will be substantiated in the coming days or like we’ve seen in the past, that rumor and news will end up being just that. Fears will reappear about a Greek default, along with other European nations and we’ll end up back where we used to be – making lows,” noted one Chicago-based proprietary trader.

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