The single biggest issue stalking global equity markets at present is the Euro crisis. The threat of a liquidity breakdown and recession in Europe is restraining equities at a time when Asia is booming and many corporates around the world are sitting on healthy balance sheets.

 

Investors are worried about the disruption that would follow from a break up of the euro and that if any one of the vulnerable countries – Portugal, Italy, Ireland, Greece and Spain – were to default then the others would follow.

 

My own view is that a partial break up of the Euro is inevitable, with Greece the most likely to default and leave the single currency this year. Whether that would lead to a domino effect remains to be seen, but a clash of political and economic factors means Greece will ultimately have no choice in the matter.

 

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