Stocks have come off their highs on a series of headlines out of Europe. With four days to go until the EU Summit, there are reports that the Germans and French are unable to agree on a plan for leveraging the EFSF, or that using the EFSF as a "first loss" insurance policy might not be legally possible.
I noted in my earlier post that traders have been trying to handicap the EU Summit this weekend — you can see this in the CBOE Volatility Index (VIX), which has remained elevated today even though stocks were in positive territory for most of the day; it has spiked up over 34 on these latest reports.
A substantial group believe that the EU will not offer enough clarity on the three main issues (bigger haircut for Greek debt, bank recapitalization, and how to spend the EFSF money), or that if a plan is offered it will not be enough to satisfy expectations. The VIX will likely stay elevated into the weekend.
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