Caton's Corner June 2010 from the Chief Economist of BT Financial Group Ltd

Financial markets have once again been climbing a wall of worry.

In May, the S&P500 index fell by 8.2%, while the Australian index, the ASX200 fell by 7.8%, to record its worst May since 1984.

Since the start of the year, these indexes are down by 2.3% and 9% respectively. Sell in May and go away indeed!

The main concern recently has been sovereign debt, particularly in the Euro area. This concern began with the revelation by Greece earlier in the year that it was running a budget deficit three times the size of what was previously thought. That's a lot of extra bonds to sell. Suddenly Greece had a major problem or rather two problems, since it is also massively uncompetitive with its fellow European Union members.

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