So much for the rally

When we asked last week about the quality of the rally in equities, we didn’t expect markets to provide an answer so quickly. The brief spell of optimism ended abruptly at the end of last week as European banks’ funding problems continued and the eurozone reported weak economic data, prompting equity markets worldwide to slump, gold prices to touch record highs and Treasury yields to tighten even further.

The grim mood continued yesterday as the reporting season got underway in China. Stocks in Hong Kong took a beating during the day and only a rally in HSBC rescued the Hang Seng index from a loss for the day. In Singapore,...