Why Optimism Over Europe Won’t Last

From  Barrons.com.

A month-long rally in European stocks just came to an end as politicians returned from their summer vacations to spoil the party. Expect market gains to be erased in the weeks ahead.

European equities have basked in a 3.8% rise since late July, as low-volume trading magnified traces of optimism. After a roller-coaster ride in the first half of 2012, the brief turnaround caught many investors by surprise and even prompted talk among some investment pros of a bull run.

But a quick dose of reality will dash those hopes, and a few political events on the horizon with uncertain outcomes likely will wipe out recent gains. Lawmakers have picked up where they left off at the start of the summer, kicking around that familiar political football, Greece. But there are other events to consider as well. One important date is Sept. 12, when Dutch voters go to the polls; a fragile coalition government is a likely outcome.