U.S. markets are happy, somehow, that emerging markets tightening to combat the effects of U.S. Fed imposed money inflows and consequent inflation will improve the appeal of domestic stock markets, and maintain the current momentum to higher levels. It is, to say the least, a very strange point of view. We wonder if it wasnt the Fed`s promise to pump money into the bond market that lifted the equity markets out of their depressive mood, and fuelled the global rally that has been going on since September. Up until Mr. Bernanke`s clarification that he would do whatever it takes to float the economy, a recession was being anticipated. The strong performance of emerging markets, the appreciation of their currencies, and the improvement in their consumption trends that ensued, was clearly the major if not the main driver of the turnaround. And now, we`re elated that emerging market demand will contract in consequence of rate rises? Where is the sense in that, and on what kind of basis do people generate such analyses?

On no basis, naturally, since markets are driven by impulses, not commonsense. Not that commonsense would have benefited us any way, since, even that doesn`t seem to be enough to help us in the face all the strange contradictions that are popping up around the world. But as human beings, we tend to believe that being reasonable is an advantage.

A very interesting piece of news came from the North African Nation of Tunisia this year where the President in power for the past 23 years, Zine ElAbidine ben Ali has quit his office, and and finally was forced to  flee the country after massive protests proved to be too much for his regime. Dismayed by high unemployment and a very corrupt administration, Tunisians have ousted their dictator from power. It is a good sign for the world at large that another dictator has been forced to say farewell to his palaces, police, and powers, but from a more general vantage point, it is not really that clear that the recent events will prove to be constructive for the trends that the optimists expect. The loss of economic stability has damaged social accord and political harmony in many nations around the world, and as the global society transitions from its present state of disequilibrium to a new mode of existence, events of strong impact must be anticipated.

In Europe, Fitch has cut Greece`s long-term debt rating to BB+, which is a junk level , and maintained the negative outlook in place for the country. Moody’s lowered its ranking for  Greece to Ba1 on June 14 and S&P rated the country at BB+ from BBB+ on April 27. The Euro wasn`t impacted by the news, and is in fact somewhat higher on the day. Since stock markets around the world have been performing reasonably well, it seems that the currency has been supported by the general optimistic mood, apart from anything specific.