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The earth shifted below the feet of DAX sceptics during the last five trading sessions. Domestic investors on Boerse Frankfurt’s weekly sentiment panel have suddenly decided to jettison the bearish beliefs that, with the exception of a brief blip at the turn of the quarter, had consumed the majority of them for almost all of the past three months. Indeed, overall optimism, as measured by the Cognitrend Bull/Bear-Index, is now recording its fourth highest level of the year after having languished in negative territory just last week. What could have caused this sudden turnaround? What is the earth-trembling revelation that dawned on German institutional investors?
Dramatic shift in sentiment despite low ebb in policy announcements
Investors around the world have been hanging on the utterances of the Spanish government over the past week. Will they or won’t they apply for the sovereign bailout and, finally, give everyone the possibility to see the unlimited firepower of the ECB in action? The eager anticipation, we suspect, is due less to investors’ concern about the fiscal hardship being endured by Spanish people, and more by the desire to finally see just how far and how fast the central bank can push the markets with Outright Monetary Transactions (OMT). The ECB’s previous bond market operations, labelled SMP, were not too effective and, so far, although it has been four weeks since the announcement and three countries are already under the bailout umbrella, not a single OMT euro has been spent…