A BIG stock week ahead
by Peter Switzer
Last week was a huge week but this week will only be a big one and it could easily help or hinder the nice rally that has been in train since June 5, with the S&P/ASX 200 index up 8.6 per cent. Over that time the German DAX is up over 20 per cent!
The weekend saw the Dow Jones index go up only 14.64 points or 0.11 per cent to wind up at 13,306.64. Meanwhile the S&P 500 was up 5.8 points or 0.4 per cent finishing at 1437.92.
This was a pretty good result given the fact that there was a small 96,000 jobs created in August when 125,000 were expected. This has put more pressure on the US Federal Reserve to go with QE3 this week and this is why I think this could be a big week. This will help Wall Street and following on from the European Central Bank’s (ECB) shot-in-the-arm actions last week for economic and share price growth, it could mean a big boost for business and consumer confidence.
I’m sweating on a snowball of good news to roll over the Doomsday merchants out there with their excessively negative and bearish predictions, but the longer stimulus is withheld, the more likely it is that we could see these stock gains disappear.
It has been a good year for stocks with the Dow up 8.91 per cent and the S&P 500 up 14.3 per cent. The local S&P/ASX 200 index is up only 6.6 per cent! We need a nice finish to 2012 to ensure we net an overdue big result, but given what has happened to BHP Billiton and Rio Tinto’s share price, it has been a pretty good outcome.
Coming up this week
If what happens this week and beyond helps world growth, it will push up commodity prices and our stock market. And this week is a crucial one for stocks going forward.
So, what’s on? Try these:
- The US Federal Open Market Committee meeting where QE3 could be announced on Wednesday.
- August US Retail sales on Thursday along with US Industrial production
- US Consumer sentiment for August at the end of the week.
- On the local front we get housing finance for July, the NAB business survey for August, lending data, dwelling starts and consumer sentiment for September.
The local data will affect the Reserve Bank’s (RBA) attitude to interest rate cuts, which I think are needed as soon as possible to ensure we don’t lose economic growth. Growth of GDP did fall from 1.4 per cent in the three months to March to only 0.6 per cent in the June quarter and that’s a bit of a worry.
However, if the Yanks do get QE3 this week, following the ECB’s stimulus plans of last week, and if you throw in the trillion yuan’s worth of planned spending in China announced last week, then our RBA could take the gamble that an improving world economy will eventually help us and so the RBA could play hard ball on further rate cuts.
It would be a timing mistake but they have made plenty of those before!
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Published on: Monday, September 10, 2012
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