Euphoria Short-Lived, European Bourses Fall As Optimism Wanes

I couldn't help but notice that the Dollar gained yesterday, closing higher, as the Euro slumped. The confidence-building capacity of the European Central Bank apparently lack credibility. Even a Fed intervention didn't help much. How ironic that it supposedly takes more Dollars to prop up the Euro!Even $1 trillion bailouts are falling short to prop up the house of cards.

May 11 (Bloomberg) -- The euro lost all of yesterday’s gains on concern the $1 trillion bailout will hurt European economic growth. Stocks fell, paring the MSCI World Index’s biggest advance in a year. Chinese shares entered a bear market.
The euro weakened 0.8 percent against the dollar at 10:41 a.m. in London, trading below the level it was at before the European Union-led aid package was announced early yesterday. The Stoxx Europe 600 Index fell 1.2 percent, after rising 7.2 percent yesterday. Futures on the Standard & Poor’s 500 Index dropped 1 percent. Copper traded below $7,000 a metric ton.
The European Union’s unprecedented bailout package is unlikely to be a “long-term solution” for the region, Marek Belka, the director of the International Monetary Fund’s European department, said in Brussels yesterday. Inflation in China accelerated to an 18-month high, the nation’s statistics bureau said today, increasing pressure on the government to raise interest rates in an economy that has been an engine of growth through the global financial crisis.
“The euphoria of 24 hours ago has passed,” Derek Halpenny, European head of global currency research at Bank of Tokyo Mitsubishi UFJ Ltd. in London, wrote in a report today. “We are in little doubt that steps taken will offer the euro little support and the aid package does not change the fact that Spain and Portugal in particular will still have to undergo further painful austerity measures.”
Yen, Treasuries Gain
The euro fell against 14 of its 16 most-traded peers, dropping as low as $1.2670, compared with the $1.2755 level at which it closed last week. The yen strengthened against all 16 of its major counterparts as investors sought the relative safety of the Japanese currency. The dollar advanced versus 13.
U.S. Treasuries rose, snapping a two-day decline, with the 10-year yield sliding 4 basis points to 3.5 percent and the two- year yield dropping 2 basis points to 0.86 percent. German 10- year bund yields fell 3 basis points to 2.92 percent, while two- year yields were also 3 basis points lower, at 0.58 percent.
Traders are betting the plan to rescue debt-laden governments from Greece to Portugal will fail to reverse the euro’s worst start to a year since 2000, forcing the European Central Bank will keep interest rates at a record low for longer. Economic growth in the nations that share the euro will lag behind the U.S. by almost 1.5 percentage points next year, Bloomberg surveys of economists show.