Emerging markets have convulsed amid concerns about government balance sheets, but investors may want to worry more about corporate ones instead.
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"Market risks are increasing to the downside, with financial strains becoming more apparent, making it a bit like 2008," Stewart Richardson, partner at RMG Wealth Management, told CNBC.
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Investors will have to deal with an avalanche of news flow from Europe on Wednesday ahead of a crucial meeting of euro zone finance ministers and US Treasury Secretary Tim Geithner on Friday.
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Fear that the U.S. economy is slipping sent stocks reeling Monday, boosted Treasurys and pushed the dollar to another new low against the safe-haven Swiss franc.
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The euro held steady on Tuesday, taking a breather after its slide to a record low versus the Swiss franc the previous day, but is still vulnerable to fears that Europe's debt crisis could worsen.
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Traders will be tuned in to Bernanke's Senate testimony Wednesday to see what he says about the economy and any new stimulus measures. Don't get too excited about a QE3, one economist said — that was just the Fed thinking out loud.
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Gold ticked up on Tuesday, after rising to its strongest in more than a month in the previous session, as worries about a slowing U.S. economy prompted purchases from investors seeking an alternative investment.
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With divisions over how to respond to the Greek debt crisis worrying investors, one analyst believes there are considerable short-term risks for the euro.
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Worry about Greece's debt struggles, Spanish elections and a Bundesbank warning on German growth combined to drive the euro lower, and put investors on alert ahead of the weekend.
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