Momentum Selling Has EURO Longs Seeking Exit

It was bound to happen. Euro equities have started the week in the cautious camp, especially after last Friday's strong session, where the Dow ended the week punching through that psychological 14,000 level. It's not unnatural to expect equities to take a breather after achieving such a milestone. However, it's the Euro news flow that everyone should be focusing on. It serves investors a timely reminder that political risks remain healthy and looming within the Euro-periphery region.

To date, the Spanish Prime Minister, Rajoy, has moved to contain a political scandal over alleged cash payments to him and leaders of his party. Not surprisingly, Spain's opposition party has called for the PM's resignation. So far this morning Spain, along with Italy, is making investors nervous. It looks like the markets are back to focusing on bond spreads. The spread between Spanish 10's and Bunds is widening, as media reports accuse Spanish high-ranking officials of having...