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EU leaders control our destiny

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by Peter Switzer

Wall Street has European jitters as the threat of a Greek exit clashes with the prospect of a divided Europe on how to deal with its debt problems. The negativity is controlled at the moment but one false move and the market could really get ugly again with shades of last August and September.

It’s a great problem that politicians only come up with strong and credible decisions when the ‘you know what’ starts hitting the fan on the stock market.

The destiny of our investments in the short-term is in the hands of the nincompoops in Europe. And tonight the summit in Brussels will undoubtedly contribute to the fear and loathing over Greece and its potential exit from the eurozone.

Of course, if they surprise us and come up with something more promising for the future of the euro and even Greece, well stocks will start to defy gravity.

The best outcome would be for Angela Merkel to ease off her current austerity stance. The new French president, François Hollande wants austerity but with some growth and he would be supported by the leaders of Spain, Italy and Portugal.

Such a change of heart could help less radical political parties in Greece fare well in the June 17 elections and this could help the euro.

The US overnight

The euro currency dropped below US$1.26 and this is the lowest level since July 2010. Oil prices are falling and so is the Aussie dollar, which says that those who play in these markets think this euro crap is going to hurt global growth.

The Dow lost 6.66 points or 0.05 per cent to 12,496.15 while the S&P 500 added 2.23 points or 0.17 per cent to finish at 1318.86.

By the way, there’s a lot of rubbish being reported, such as Lucas Papademos, the last Greek Prime Minister, referred to plans to exit the euro but these have now been denied.

Hopeless leadership

There is brinkmanship going on and it’s because the leadership in Europe is hopeless. At least in the USA Barack Obama and Ben Bernanke drew up a plan to print money, lend to key companies and protect the banks.

The Europeans have acted like Europeans — rather than being united, they have remained more divided and that’s why they look like they’re about to fall.

This uncertainty is spooking markets and it’s understandable. Against this, the US continues to get positive news with new home sales up 3.3 per cent, which was well received by the housing experts who are starting to see green shoots.

Later today we will hear from the Brussels meeting and what is said will affect our share prices — you can bet on that.

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, May 24, 2012

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