With the start of a new economic week, the main highlight remains on the European Summit, which is supposed to establish a comprehensive roadmap to tackle the two-year old debt crisis, where a final decision by European leaders will be announced on the second summit on Wednesday, referring that the ECB was ruled out from participating in the boost of the region's rescue fund.
Asian shares rose on hopes European leaders will reach a decisive agreement on Wednesday, followed by a similar advance in its European counterpart.
By the same token, high-yielding currencies surged, led by the euro which rose to the highest level in six weeks against the dollar.
So far, there is final agreement reached between leaders yet the summit showed that there is commitment between them to bridge the difference, noting that there is consensus regarding banks recapitalization as expectations refer that this will be adopted through raising capital requirements by mid 2012.
Regarding the expansion of the firepower of the European Financial Stability Facility (EFSF), there are no clear figures or methodology, so far, yet the ECB will probably be ruled out as a key player in boosting the EFSF.
Moving to the Greek debt dilemma, European finance chiefs approved on delivering the sixth tranche of last year's bailout, worth 8 billion euros, just waiting for the IMF to approve its share from this installment.
Greece will probably receive the next tranche by Mid November, before getting a second bailout that is likely to include writedowns on Greek bonds up to 50%.
Moreover, fundamentals released today from the euro area came frustrating as it showed contraction in both manufacturing and services sectors in October, citing the negative impact of the slowdown in global growth and debt crisis on the 17-nation region.
The advanced reading showed a widening contraction in the manufacturing sector to 47.3 from 48.5 in September while services shrank to 47.2 from 48.8, according to the PMI gauge. Accordingly, the composite index recorded further contraction to 47.2 from the prior 49.1.
Despite the efforts done by European leaders to contain the debt crisis, fears are rising that European economies may face another recession that would worsen the situation in the old continent.
