Business News
Europeans given spoilt child love
by Peter Switzer
Wall Street is giving the Europeans the benefit of the doubt, similar to that parent who knows the son is a worry but still backs him anyway. Will this be redemption for the European Union or will it be a leopard-and-spots situation?
The big tests come next week and the market was a little surprised to learn that after the important weekend meeting, there would be another on Wednesday that could fully outline the final plan.
Despite this, the Dow and S&P 500 ended up and that reflects tentative support for what will unfold in Europe in the week ahead. However, the vote of support has not been big and that also reflects the track record of the politicians who will hatch the sovereign debt/bank rescue plan.
Adding support to Wall Street investors has been some better US economic news.
For the record, the Dow was up 0.32 per cent to 11,541.78 and the S&P 500 was up 0.46 per cent to 1215.39.
Overnight in the US
Let’s just ignore Europe for the moment and focus on the economic revelations and here they are:
- Weekly jobless claims were down more than tipped by economists.
- Factory production for the Mid-Atlantic region had a big rise to the best level since April. Get this — the reading was supposed to be -9 but came in at 8.7!
- Leading indicators were up 0.2 per cent and CNBC says this is the fifth month in a row that this has happened. And after around 100 US companies have reported, some 80 per cent have beaten expectations despite some high profile misses such as Apple.
News from Europe
Personally, I’m sick of speculating about what the Europeans will come up with but it better be good or the market will head south big time. It looks like Germany and France are stepping up to the plate because they know their bankers need them to but there are 15 other countries’ politicians who could put a fly or two in the ointment next week.
By the way, the Greek Parliament voted to pass an austerity law, which cuts wages and raises taxes, which is a sign that good sense is even prevailing in Athens.
Final point
One final positive new item again came from CNBC, which talked to Goldman Sachs Asset Management chairman Jim O'Neill, and he’s bullish on the US.
The States is "doing a lot better than the mood appears to be. There seems to be this mood around, an inevitability, about the next course or we’re back in recession or close to it. I don’t really buy that," O'Neill said, adding he sees "no momentum for a recession".
Most US data has been strong, particularly in manufacturing and auto sales, he said, and current US growth in the two per cent area "strikes me as the cruising speed".
In addition, "you have clear bias from the [Federal Reserve] under Ben Bernanke".
My muddle-through thesis still has legs but I’m hoping on a good result from the ‘spoilt children’ of Europe in the week ahead.
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Published on: Friday, October 21, 2011
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