I think this is the result of the implied government guarantee that most investors believe is far stronger in Europe.
However, now that the global financial system is so strongly intertwined I don't think the world financial system could handle a default resulting in the liquidation of any bank on the list.
So does that mean all these banks' default insurance should be trading at government rates?
Don't be Fooled by Recent Rally Written By: David Neubert 2007-11-14 10:50:51 The last two days have all the markings of a bear market short-covering rally. The sectors that have the most negativity have rallied the most: Retail and Financials. If this were a real transition from a negative selling market to a rally, the sectors that have been leading would continue to lead: Technology and Materials.
So what is happening? People who short stocks are much more skittish than those who go long; they are also more disciplined traders. That means that when a trade starts going against them they get out in a hurry (remember, good traders know that the odds are stacked in their favor and survivors win. I always told my traders, "Survivors win so get out if you don't know why a trade is going against you. Don't be right, be a survivor.") That is why bear markets are full of break neck rallies in lagging sectors. That is exaclty what has been happening the last two days.
