Investors began 2ou with high hopes. Bob Doll of BlackRock, a fund-management group, expected double-digit gains from the American stockmarket; the strategists at Barclays Capital expected a 22% return from European shares. Instead Wall Street is flat and European investors have suffered double-digit losses. The year is ending in a mood of unrelenting pessimism. Although a spike in oil prices and Japan's nuclear disaster have played their part, the real problem has been Europe. The debt crisis is deeper and more widespread than almost anyone feared at the start of the year. In a joke coined by Jim Grant, a newsletter writer, government bonds have turned from offering a risk-free return into becoming a return-free risk. Matt King, a credit strategist at Citigroup, thinks this change in attitude has been decisive. "The discovery that a credit you thought was safe, and accumulated a large exposure to, is actually rather risky, tends to lead to a wave of forced selling so strong that it can overwhelm the fundamentals."
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