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Achtung baby!

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by Peter Switzer

Achtung baby! I never thought I would use these two words in an introduction to a market wrap but it’s really appropriate considering the impact of a German court on Wall Street overnight. And maybe we should throw in Achtung Obama as well with the President due to reveal his jobs plan tomorrow.

For the record, the Dow was up 275.56 points, or 2.47 per cent, to 11,414.86, while the S&P 500 put on more than 33 points, or 2.86 per cent, to 1198.62. And banks were an important ingredient for the rally.

Why? It’s simple. The German Court ruled it was constitutional for the Germans to support the bailout strategy for the PIIGS countries and this meant European banks were given a break.

After all, if the governments don’t help out with the bailout, the Euro-banks take a terrible bath and this hurts banks in the US, which KO’s Wall Street and other banks around the world. It becomes a GFC Mk II result or even worse!

Adding to the positive tone at the NYSE was the Obama US$300 billion jobs program which we will hear about tomorrow. Leaks have been well-received by investors and so it should be interesting to see how the facts affect the market compared to today’s rumours.

All up, the above good news offset the Beige Book revelations, which pointed to a slowing economy in some areas of the US but no one was surprised at this.

Note some experts are telling us we have seen the low now and one commentator pointed out that the Dow was up around 11 per cent over the past 12 months. You can lose sight of these little things when you are panicking about what’s going on now!

For our S&P/ASX 200, we’re down around eight per cent but if you had picked up four per cent in dividends and received franking credits you could be down around two per cent, which is not bad considering the instability and volatility we’re seeing right now.

I reckon some believable good news from the US and Europe will give markets a real kick along. Then we might be able to say “Auf Wiedersehen” to these pesky bears.

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: Thursday, September 08, 2011

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