Euro win — yahoo!
by Peter Switzer
We Aussies went to sleep hoping that the Europeans would show some leadership and that a credible rescue plan would result. But what did we get?
Before summing it up, let’s look at what I went to and saw as soon as I got out of bed — the Dow was up 162.42 points, or 1.39 per cent, to end at 11,869.04!
My reaction? That’s good — the Europeans have not stuffed up for a change but the rally isn’t big, so what gives?
Well in simple terms, the Europeans plans to ramp up the EFSF — the fund that will bankroll the rescue of European governments and banks — four times to one trillion euros. This gets me thinking about the movie Austin Powers when Dr. Evil said, “One million dollars!” and no one was impressed. However, in this case, one trillion is impressive but it’s not the bazooka that the likes of Nouriel Roubini of Dr. Doom fame has alluded to. Some experts think the Europeans need two trillion dollars but one trillion made Wall Street buy overnight and that’s a good sign.
Unfortunately the EU leaders haven’t worked out the haircut for the banks that are creditors to Greece and we might have to wait a few weeks for this and that’s why the rally hasn’t been big, but it’s a positive start. And this represents over-achievement for European politicians.
Other good news was that China was thinking about investing in the EFSF but that makes good sense as Europe is a very important customer of Chinese exports.
On the US front, durable goods orders were up by the biggest rise in six months and new home sales were the best for five months. The US economy isn’t heading into a double dip recession.
The European rescue plan is a work-in-progress but overnight we got some credible steps in the right direction and that’s why stocks headed higher.
On Cup Day, I will be backing European horses, which is hard to say as a dyed-in-the-wool Aussie but they look such quality performers. I only hope their politicians can measure up to their horses.
Go the Europeans!
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Published on: Thursday, October 27, 2011blog comments powered by Disqus