Do Falling Chinese and Southern European Markets portend the end of March 2009 rally?

For the last few days the Shanghai and Southern European markets of Spain,Greece and Portugal have been falling despite higher US stock indices.This is a bit anomalous since most of the equity markets are  highly correlated due to the globalization of financial capital..Gold has also been continuously rising despite fall in  prices of other commodities except for oil.Bullish sentiment in the market has been high plus small and mid cap indices have been outperforming the large cap indices.This might mean that the market has topped out because I can’t see the global markets rallying with two big engines of global GDP Europe and China stalling.

Greek default fears making the Euro sink to below 1.31 per dollar while European markets are tanking.

Shanghai Below 2,900 as Bank and Property Measures Factored In – JLM Pacific Epoch

The Shanghai Composite Index fell 1.23% to end at 2,835.28, while the Shenzhen Composite Index fell 0.70% to end at 1,104.86 on Tuesday, May 4. Trading turnover on the Shanghai and Shenzhen Stock Exchanges was RMB 78.76 billion and RMB 59.97 billion, respectively. Mainland markets were closed May 3 for China’s Labor Day holiday.

Mainland financial shares were hit hard on Tuesday, following the closure of mainland markets on May 3 for Chinese Labor Day and the central bank’s announcement on May 2 that it will increase bank reserve requirement ratios by 0.5 percentage points as of May 10.

Goodhart Says Greek Deal May Collapse as Crisis Tests Euro – Businessweek

Greece’s bailout “might collapse” and the nation’s debt crisis makes it “hard to see” how the euro will survive in its current form, former Bank of England policy maker Charles Goodhart said.

“If this financing deal should collapse, and it might for one reason or another, then there would be a question of what the Greeks could possibly do,” Goodhart said in an interview with Bloomberg Television in London today. “Default would be totally disastrous for them and leaving the euro would equally be disastrous.”

‘Appalling Deflation’

“If the current bailout is put in place, it will be enough to meet their immediate financing problems not only this year but for the next year or two,” Goodhart said. “The problem is that it doesn’t meet their adjustment problems. It doesn’t deal with the problem the Greeks, in part from having too large a deficit and too large a debt ratio, are very uncompetitive and if they actually cut back the deficit as fast as is being required they’re just going to go into appalling deflation.”