Euro-surge on Wall Street
by Peter Switzer
Optimism has made a comeback with agreement from the leaders of France and Germany on how they will rescue the EU resulting in a ‘euro-surge’ on Wall Street.
The Dow was up 330.06 points, or 2.97 per cent, to 11,433.18 while the S&P 500 went up 39.43 points, or 3.41 per cent, to 1194.89.
The leading stocks were the ones that have been beaten up because of the European debt problems — the banks — and this should help our local banks and overall index today as well.
Leaders acting like leaders
German Chancellor Angela Merkel and French President Nicolas Sarkozy agreed to put together a plan to fix the Greek debt problem, strengthen European banks and put in place the pre-conditions to stimulate eurozone growth.
Leaders acted like real leaders and financial markets lapped it up.
On the back of this, commodities went higher and so did the Aussie dollar, which was at 99.57 US cents and even the euro was up two per cent against the greenback and this hasn’t happened for over a year!
In Belgium, the government has nationalised the Belgian banking division of Dexia, which had an overexposure problem to Greece.
Meanwhile, there’s growing optimism on the US economic outlook with Goldman Sachs raising its third quarter growth forecast from two to 2.5 per cent, effectively ruling out the claims by doomsday merchants that the Yanks were heading for a recession.
This follows the news that 103,000 jobs were created in September, which was below what America needs to drive unemployment rates down but it was around 40,000 better than what was expected by economists.
For months I have been arguing that the US would dodge the recession bullet but it was going to be European politicians who will make or break the stock market. Right now the Europeans are stepping up to the plate but there’s still a long way to go before I can tell you that we’re out of the woods where the bears hang out.
I can see the bulls grazing in a paddock outside those woods but we’re not quite there yet.
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.
Published on: Tuesday, October 11, 2011
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.