Germany is in for a rude awakening as investors come to the conclusion that the nation will have no choice but to support troubled European nations. It can do it in two ways - either through massive euro devaluation (via QE) or by increasing it's own debt burden (as it did with East Germany integration). This does not help German government debt. The eurozone crisis is starting to take it's toll as investors are abandoning all eurozone bonds, Germany included. The German 10-year yields have now gone above those of the UK and significantly over the US Treasury note.
Bloomberg
This is a dangerous development because it creates a confidence problem that quickly spreads to global financial institutions who have been trying to reduce their exposure to "fringe" European states and roll into the "safe" German paper.
How does that impact the US? Below is a regression plot of EUR/USD against the S&P500 since October-2011. The correlation is now above 0.85 - the Euro might as well be as US stock. And this correlation increase is not unique to the US equity markets. No market is safe.
Bloomberg
