Buyers rush into cheap stocks - 22nd May 2012

Yesterday’s strength continued into today as investors saw an opportunity to buy cheap stocks that had suffered heavy losses in recent weeks.  We’ve seen a rush of buying today as investors who’ve missed out on the bounce so far rush in to get a piece of the action.  Markets often overreact and become over bought or over sold and in this instance it looks like the latter.

Buyers remain convinced that European leaders are going to do their outmost to prevent Greece from exiting the euro because the risks of a catastrophic Lehman style global recession are just too great.  Even though France and Germany may no longer be singing from the same hymn sheet as to how to address the problem, they stand shoulder to shoulder in wishing to protect the EU project.

The rally comes ahead of tomorrow’s EU summit which is expected to see some more pressure applied to Greek voters to accept the austerity measures being imposed on them to avoid exiting the eurozone and at the same time there’s hope that common ground will be agreed as to how to build a proper firewall around Greece should the worst case scenario occur.