Business News

EU banks OK

| More

by Peter Switzer

The European bank stress tests couldn’t have come in any better with only seven banks out of 91 deemed vulnerable to another recession. This good news on more better than expected company reports helped the Dow Jones index up 102.32 points or nearly one per cent to finish at 10,424.62.

This should help local shares today.

The most-watched index by professional traders, the S&P 500 index, went up 0.82 per cent as the sum total of good company news buoyed investor confidence.

The pick of the company crop last week was Boeing, which put on around 10 per cent to its share price and this has to be seen as a good sign with US markets up three to four per cent or so for the week. It was a good effort.

Stress tests

And while there were inevitably question marks over the calibre of the stress tests by the usual suspects — bears, hedge funds and short-sellers — EU banks trading on the NYSE had nice jumps in their share prices.

Optimists would have liked a bigger spike from the better than expected stress tests but given the softer US economic data, the general rise in US share prices is positive and well-timed. That said, a pickup in economic data will be needed for a strong rally to take root.

Santa Claus rally

AMP’s Shane Oliver on my Sky News Business Channel program said history shows Wall Street can wobble in September and October but he expects a Santa Claus rally, which is also quite typical, and he thinks this will coincide with better US economic data as well.

The Yanks need better job creation and housing sales news before a lasting economic recovery kicks in.

Adding to the positive picture were profits reports that beat analysts’ expectations from Verizon, Ford and Honeywell. Another plus is that many of these companies are raising guidance, which means they see an improving economy at their coalface.

The week ahead

While this week brings more big name company reports, investors will want to see something good in new home sales, the S&P/Case-Shiller home price index, the business activity survey, another consumer confidence survey and second quarter economic growth.

This week’s numbers will create anxiety for those who have taken a set against the market and if the good news continues to kick in there could be another jump in market indexes.

Keep your fingers crossed.

For advice you can trust, contact Switzer Financial Services.

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.

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Published on: Monday, July 26, 2010