Europe Stress Test Results

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Dear Investor

Stress Test results of European Banks were declared on Friday. Except 7 banks, rest cleared the stress test positively. Among failed banks, one was from Germany, Hypo real estate, which had gone broke in 2008 crisis and later bailed out by govt. Rest failed banks are from Spain, mostly regional saving banks.

Results have raised serious doubts on toughness of stress test as no other prominent bank is in list.

This stress test was conducted on the lines of the USA stress test to reinforce the confidence.

I think, experts and institutions know that neither US stress test was complete and stressful enough nor is Europe stress test.

Exercise was mere step to show that rest ensured we are constantly keeping an eye on situation.

More than that, I believe European Central Bank is begging more time to settle down the situation, to recapitalize banks, to calm the sovereign debt issue.

Question is whether Market will accept the results and will take positive cues from that.

If US results are any guide then yes. People had raised serious doubts on US stress test and results were parallel as no major US bank had failed in stress test.

So, for day or two, media may keep discussing toughness issue of stress test. But, market will slowly greet the results.

But, be cautious. Because, Market is awaiting for more important data from USA. That is 2nd Quarter GDP data to be declared on 30th July.

Nifty has crossed barrier of 5400 successfully giving daily and weekly close above it.

I expect Market to continue upside for some time if US GDP data does not interrupt.

Concern: IF US GDP comes significantly on lower side, that may halt rally world across and may significantly correct market with prolonged consolidation.

Regards,
Dhaval
Investment Academy | Baroda | 098255 28815
Blog: Http://investmentacademy.wordpress.com

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