Europe KOs Obama!
by Peter Switzer
It was supposed to be a positive circuit breaker to kick-start job creation and consumer confidence in the US but Obama’s ‘end the circus’ speech was countered by the continued ‘cirque de stupid’ in Europe!
The star clown — Greece — remains in the economic big top with a renewed threat of a default spooking Wall Street. And concerns weren’t helped when a leading ECB official resigned. When will this Euro-drama stop?
The Dow lost 303.68 points, or 2.69 per cent, to 10,992.13 while the S&P 500 gave up 31.67 points, or 2.67 per cent, to end up at 1154.23.
The volatility index is now near 40 and it was below 20 earlier in the year. We’re in very volatile territory right now.
The rumour that hurt stocks was that Greece was going to default over the weekend. The Greek finance minister denied this, but I don’t think this guy has a lot of international credibility.
Meanwhile the Germans have a B-plan, which says it will shield its banks from a Greek default. This will be a strategy that all European governments are likely to take.
In fact, it might be a smarter strategy and that could mean that Greece is cut adrift. It could mean that the Europeans would not be throwing good money after bad.
Not making matters any better was the ECB official’s resignation that meant there were divisions in Europe’s central bank at a time when unity was crucial.
All of this sideshow hurt President Obama’s $447 billion jobs plan which many said would not get the thumbs up from Congress. If history is any guide, this overdue good idea will meet opposition in Congress. However, if the circus does end and a comprehensive agreement happens, then this could be the shot in the arm that the US economy needs. That’s a big 'if'!
On the key watches for the week, later this week the US will get the latest inflation reading and a whole series of manufacturing as well as industrial production numbers.
That said, the US and Wall Street are support acts to the main attraction — the Euro-drama. You can hope that somewhere out there, there is a happy ending. If there is, let’s hope it comes as soon as possible.
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Published on: Monday, September 12, 2011
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