The Next European Crisis
Keep an eye on French stocks. They are now in the danger zone.
Regular readers know why we’ve been focused on the price action in the euro and critical European companies like financial giant Deutsche Bank. After all, Europe is the world’s largest economic block (even bigger than the U.S.)… so its huge debt problems can cause major waves all over the world.
#-ad_banner-#One of the biggest concerns here is what happens in France. France is the world’s fifth-largest economy. Its banks have tremendous exposure to the bad debts of basket cases like Italy and Greece. Many folks worry that if the crisis can affect France, it will kick off a horrible recession and stock crash.
We track this situation with the “Dow Industrials of France,” the French CAC 40 Index. It’s an index of France’s most important companies. As you can see, the CAC suffered a major hit several months ago. The index fell from above 3,800 to below 2,800 in less than two months (A). This drop was followed by a “relief rally” that took the index back toward 3,400 (B). But in the past few weeks, the rally has sputtered out (C)… and the CAC is in danger of breaking its September low. Should this happen, it’s a sign of much worse things to come for Europe…