Just When Investors Thought Europe Was Fixed...

Investors spent most of the summer believing that central bankers would protect them from the looming European debt threat, only to find in recent days that they may be wrong.

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Volatility has returned both on Wall Street and in the streets of Europe, where Spaniards have been protesting austerity measures, and, in doing so, sparked the realization that the sovereign debt crisis is far from over.

Stock markets around the world have been trading lower, generating some worries that Europe could put a halt to what has been an otherwise powerful 2012 rally.

"When everybody is all-in and all-long, the market is priced for perfection," says Walter Zimmerman, senior technical analyst at United-ICAP in Jersey City, N.J. "The market will only be able to tolerate good things happening. Anything that starts unfolding in the other direction, the market is going to be extremely vulnerable."

The increased nervousness has come even though European Central Bank President Mario Draghi has assured the markets that he stands at the ready to provide help to euro zone countries struggling with debt issues.

At the same time, Federal Reserve Chairman Ben Bernanke recently announced a third round of quantitative easing with the goal of driving down the U.S. unemployment rate.

 

Full article here: CNBC