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China and Europe help stocks

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by Peter Switzer

What will good news do to this already impressive rally? You don’t have to be a stock market genius to work that one out, but that’s what happened overnight on Wall Street and the market lapped it up.

So, what was the good news?

First China’s great trade result, which excited our stock market yesterday, travelled to the USA and kept the bulls charging. Regular readers will recall that I have linked part of my optimism to a belief in China’s comeback powers and it looks like I was on the money.

China exports positive news

At the core of the good news was export growth in December, which blew expectations out of the water. November’s number was US$19.6 billion but in December it spiked to US$31.6 billion!

Exports surged 14.1 per cent against only a 2.9 per cent rise in November while imports were up six per cent compared to an expectation of three per cent.

The rise in exports means the world economy is demanding more and that’s a great sign for the global economy, and it means China might have to rely less on locally created demand to keep its economy growing.

Also the better import reading suggests Chinese businesses are starting to buy again and it ties in with the rebound of iron ore prices back around US$150 a tonne.

Who knows, if this good news is sustained Treasurer Swan might get his precious Budget Surplus which is economically unnecessary but politically important to the Gillard Government.

To Europe

Back to the good news, and even Europe helped keep it all positive. In a nutshell the European Central Bank (ECB) didn’t cut interest rates with the ECB boss, Mario Draghi noting some green shoots of economic and market positives, which suggested that business is better in Europe than many were expecting six months ago.

Last year I talked about the need for the snowball of confidence to gain momentum and from stock markets to economic data, we’re starting to see it.

That’s why the outlook for stocks in 2013 is more positive than in 2012.

On Wall Street

Overnight the Dow ended up 80.71 points or 0.6 per cent to 13,471.22.

Meanwhile the S&P 500, which is near five-year highs, ended up 11.1 points or 0.76 per cent to 1472.12.
Locally the retail numbers for November and the latest job vacancies are not looking flash but I suspect over the first six months of this year the data will go from worrying to ordinary before picking up in the second half.

Hopefully we will get one or two more rate cuts and that will set us up for some nice numbers in the next financial year.

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.

Watch more from Peter on SWITZER TV.

Published on: Friday, January 11, 2013

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