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Fears of European Contagion Have Investors Fleeing Risk
CNBC.com | December 14, 2011 | 04:04 PM EST

Fears that Europe will drag the world into recession—and no new signals of relief from the Fed —combined to pressure the euro and trigger a selling wave across risk assets.

The moves were exacerbated by the year-end which has some investors looking to square positions and creates less liquid conditions in some markets.

“While everyone was sure a year-end rally would occur, it seems like everyone’s throwing in the towel,” said Daniel Greenhaus, chief global strategist at BTIG. "We're running out of time for a Santa rally. People are just not happy with the investing environment right now."

The euro made an important break below 1.30 Wednesday. Traders have been watching the single currency decline since European leaders ended last week's summit with no big framework for a solution to the debt crisis and no promise of one.

But perhaps the worse development for markets was the European Central Banks’s stated position that it would not be a major buyer of sovereign debt, which traders saw as a way to keep rates from rising further for struggling economies.

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