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Europe has to step up

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by Peter Switzer

Wall Street ended up over the weekend with the Dow putting on 46.17 points or 0.37 per cent to end up at 12,460.96. The index is now up 243.4 points or two per cent since the start of 2012 and up only 2.8 per cent for the past 52 weeks. And this could be a make it or break it week.

We need Europe to step up to the plate this week if we want to see our stock prices make it into the black before June 30. This could be a very big ask.

The issues

The huge issues to watch will be how the Spanish banking crisis plays out. European Union officials want it sorted before the Greek election and I reckon if a rescue is mounted this week, markets will like it.

We got a bailout of 100 billion euro but the size disappointed Wall Street and this helped push the Dow down 1.14 per cent to 12,411.23 overnight. I wouldn’t get too negative on this news because at least the Europeans are moving and it made the Irish start complaining that their deal was bad compared to the Spanish.

The next issue to watch is the Greek election on Sunday and if it spits out a government that will not exit the euro, then that will be another crisis dealt with. I’m not saying it means there’s a solution but it will take the euro off the endangered currency list.

Another constant watch is the ongoing assessment of the US economy and there is a big hope that the Fed might invoke QE3 — more money supply expansion — but I reckon they won’t move on this until Europe forces its hand first and then if the economy really weakens.

Out this week

This week we will see retail trade figures, inflation data, industrial production and consumer sentiment.

Locally the NAB business survey is released and we will see the latest consumer confidence reading since interest rates were cut and we’ve had a run of surprising, better than expected economic data.

The better data — jobs and growth — have pushed the Aussie dollar over parity but if market panic takes over again, our dollar is bound to dive. It’s now at around 98.6 US cents.

Like last week, which saw our market do pretty well, this week is bound to be a very interesting ride. Let’s hope it’s one that gives a lot of satisfaction to those who have stuck with stocks but I’m making no promises — the EU team does not deserve my confidence but I hope they can step up.

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: Tuesday, June 12, 2012

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