Business News

A German stole our Xmas gift!

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by Peter Switzer

The German Chancellor Angela Merkel did her best to rob us of a Christmas rally, disappointing markets with her remarks that she wouldn’t budge on what the European Central Bank could do to help the worsening debt contagion.

Earlier, European stock markets were up but after Frau Merkel poured cold water on market hopes that the ECB would be let off its leash to diffuse the contagion threat, they ended in negative territory. With the Americans on Thanksgiving Holiday celebrations, Wall Street was closed and that’s why the focus goes onto the European markets.

Reuters reports the German Chancellor confirmed in a speech that she was still opposed to “jointly issued euro bonds and calls to change the role of the European Central Bank in the fight against the eurozone debt crisis”.

The most responsible thing to do is what she wants and that’s getting EU countries to get their budgets in order. That takes time, however, and I don’t think time is on the Europeans’ side.

"The comments about the ECB were a clear message to the market not to expect anything in the short-term," Veronika Pechlaner, a fund manager on the Ashburton European equity fund, said to Reuters. "The market is looking towards the ECB as it only has the firepower necessary to help the situation. The question is how much systemic risk do you get before something is done."

I think the Germans are playing with fire and if they accepted the views of many of the eminent economists and market experts out there, they would recant and change their ways.

Unfortunately they’re stubborn coots and it might mean we will have to endure a lot more bond yield tension and stock market sell-offs before the Germans change their minds.

Of course, if they don’t, then St. Nicholas won’t be delivering what Americans and Wall Street love and have got used to — a Santa Claus rally. And of course, if they don’t get their Christmas wishes then there won’t be any market ‘gifts’ under our trees as well.

That might mean all of our Christmases come at once but they won’t turn up until some time in 2012!

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Friday, November 25, 2011

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