Overnight, Asian markets were mixed but generally up.  The European markets are decidedly positive.  The futures indicate the Dow will gain about 90 points at the 9:30AM opening.  After a record-breaking week, it is encouraging to see investors are buying risk, before the European summit this week.  You will recall the European leaders promised resolution of their financial crisis this week.  If they don’t . . . there could be a dramatic reversal.

At the same time, notice the bond market is telling us something different.  Widely considered more wise and less emotional, the bond market is telling us to beware.  Interest rates on European bonds have increased, even on German bonds, as bond buyers are buying bonds in the U.S. and Asia instead of Europe.  Sarkozy correctly believes this problem could be solved by the ECB issuing Eurobonds, which would obligate all nations of the EU, not just one.

Merkel says the problem with the ECB issuing Eurobonds is that the rich nations like Germany could be paying for profligate nations like Greece and Italy.  I don’t see how they can negotiate such differences by Friday.  While Germany and France are the loud voices in this debate, don’t forget there are 25 other nations in the European Union, fifteen of which use the Euro as their currency.

Sarkozy wants to create a parallel universe of European nations to bypass the long EU approval process, a sort of economic “coalition of the willing.”  We shall see . . .