EUROZONE: Goldman Sachs strategists note that eurozone sovereign
spreads have "widened considerably over the past month, and in some
countries are wider than during the tensions of May-June that led up to
the institution of the EFSF and the ECB's purchases." They maintain
however that the widening has probably gone too far. Their reasons:
First, "the growth outlook has improved, led by the core countries,"
they say. In addition, fiscal consolidation "is gradually bearing
fruit," as evidenced by the improvement in the cash deficits of Spain
and Greece. Also, "the ECB has extended its provision of liquidity on an
'all-you-can-take basis, albeit at shorter maturities," GS says.
"Finally, indicators of risk aversion or funding distress have unwound
half of the increase witnessed in the late Spring," the strategists add.
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