Today's Major Market Move: Italian Stock Market Declines 8.4% in the Past Week

After surging 25% two weeks ago on news of the latest iteration of a Greek bailout, the Italian stock market gave some of that back last week when it fell over 8%. There were wild gyrations in many equity markets over the course of the week as the on-off-on-off Greek referendum saga played out. The two markets that performed worse than Italy's last week were Cyprus, collapsing a whopping 20.7% (we're going to talk about them in the next post), and Argentina which declined about 10%.

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While Italian stocks surged immediately after the bailout announcement, the Italian bond market was not quite so euphoric about the news and Italian yields have kept rising. The 10 year is now at an all time high (from Bloomberg):

Forget about Greece, the ultimate goal of the EFSF expansion was to stabilize the situation in the Italy, which so far has not happened. Throughout the European crisis this year it's been made apparent that a deteriorating economy does not reverse trend all on its own; it requires a 'shock-and-awe' type intervention. So be prepared to hear rumors of yet another bailout involving some combination of Germany,France, the IMF and the ECB, with hints of participation by the BRICs throw in for good measure. According to this blog post on Business Insider, DEFCON 1 isn't reached until the 10 year hits 8%.