Good news week?
by Peter Switzer
The best news for our market today from Wall Street is that volatility eased and the big 330-point gain from yesterday was not seriously undermined today. The VIX or fear index is falling and if good news can outweigh bad news then we could see share prices head up.
And possibly more interesting was the report from Alcoa, which missed on earnings but more importantly revenue came in better than expected. Selling more than expected is a good sign as aluminium prices fell over the quarter and weakness in Europe added to the company’s challenge to make a buck.
To the scoreboard, the Dow was off 0.15 per cent to 11,416 while the S&P 500 was flat at 1195.54.
There was a bit of Euro-anxiety with Slovakia delaying the vote to make up the 17th country to support the plan to increase the powers of the European Financial Stability Facility, which is the EU’s rescue fund for the PIIGS countries and the continent’s troubled banks.
We also learnt that Greece is likely to get its eight billion euro ‘allowance’ to meet its debts in early November but the market’s gains will be dependent on the inevitable credibility of the European plan that will have to address the debt issues of both the PIIGS and the banks. That will be the test, which will send stocks up or down.
There was also better news for US small business with confidence rising in a measure from the National Federation of Independent Business. These kinds of readings are often ignored but I have found the local Sensis small business confidence survey a solid forward indicator of where the Aussie economy is heading.
One final point: the rescue of the Franco-Belgian bank — Dexia — could be a critical turning point. I think it showed the Europeans that if something solid is not done, there could be more failures and that could sow the seeds of a European and then a global disaster.
I suspect we will see a European version of the US TARP program that saw the US Government lend money banks, much of which has been paid back.
There are still a few more important scenes to come in this debt play out of Europe and I am hoping that it turns out to be an inspirational drama with a happy ending and not a Greek tragedy played out across Europe and, later, the world.
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Published on: Wednesday, October 12, 2011
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