The week European policy makers unveiled a $1 trillion loan package

Market took a beating on Friday with DJ Eurostoxx 50 down -4.7% and Spanish IBEX taking one of the largest Eurozone hit of -6.64%.

Fears that the eurozone economy is heading for a death spiral of falling prices and plunging output threw global markets into a tailspin. This was the unlikely story the same week Eurozone policy makers unveiled its $1 trillion loan package to help struggling countries with their debt. But the doubts about ECB's independance and strains amongst partners are becoming clear as the market digests news of the rescue package one and a half times the size of the US TARP.

Analysts have been working through the week to assess if Spain's problems could be too big to bailed out and market rumours that Spain could need a 280 billion euro loan raised alarm bells on Friday.

Essentially, what the European policy makers are trying to do is to treat a solvency problem as if it was a liquidity problem, however such an expansionary policy will simply just buy Eurozone more time but real improvements still needs to be made to reduce government deficits and promote growth in the "more-abled" Eurozone countries.

As the Euro trades for the fourth week lower against the USD, we are likely to continue to see downside pressure and test the key level of $1.165 before the year end.

Eric Tan,
London