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Europe’s winds driving me mad!

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by Peter Switzer

I nearly wrote: “Those pesky Europeans have done it again!” But hell, I’m sick of writing the obvious. The simple facts are, until Europe puts its plan on the table, investors will be, as Tolstoy might describe it, like leaves on the ground tossed around by the changing winds.

At the moment there are high hopes about the weekend EU meeting but overnight the French and the Germans weren’t seeing eye-to-eye and investors saw this as a negative wind, which meant the Dow dropped 72.43 points, or 0.63 per cent, to 11,504.62.

Don’t get me wrong, this was a pretty good result and shows that share buyer doubters are trying to keep their bullet of optimism in the breach, ready to pull the trigger provided the Europeans deliver in coming weeks.

Other forces for negativity included the slightly disappointing Apple results and the Beige Book, which showed employers are reluctant to hire at the moment.

But against this, housing starts boomed up 15 per cent in September, which is a great sign but it has brought some head scratching, suggesting that it might be a statistical blip.

A worrying, but understandable development was a spike in the VIX or fear index to 35 but it was the Europeans mainly behind that measure of negativity.

The latest apparent European impasse concerns what monetary muscle the European Financial Stability Facility will have — one trillion or two trillion euros?

Unfortunately, we have to wait until the weekend but there might be another wait in early November when the plan goes to the G20.

It’s a waiting game and investors remain on a knife’s edge because this sucker — the stock market — is poised to spike higher big time before Christmas or it could sink like a stone on the strength of the Europeans' decisions.

The experts say European horses look like a good bet for the Melbourne Cup but their counterparts in EU officialdom don’t look like reliable conveyances.

The winds of change are afoot but I hope they don’t drive me mad and hurt my share portfolio, as I want some Christmas cheer in December.

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: Thursday, October 20, 2011

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