How bad is this?
by Peter Switzer
If you wanted some reason why some journalists went negative in the weekend newspapers, CNBC summed it up by noting that last week was the worst Thanksgiving week since the Great Depression!
On the Friday and on a shortened trading day, the Dow lost 0.23 per cent to finish at 11,231.78 while the S&P 500 was at 1158.67, off 0.27 per cent but it’s below the support level of 1180 and so that makes me more negative than positive.
It means we need something big and positive out of Europe but I have long given up on the capacity of the Europeans to pull off the big play. So we just have to hope and, as we all know, hope isn’t a strategy!
For those interested, Black Friday in the USA has this name because it’s the first day of the holiday shopping season that ends in the New Year. It’s on this day that retailers mark the period where they can, if shoppers turn up with their wallets and purses, get out of the red and into the black.
But the USA isn’t the problem — it’s Europe — though I’m heartened that the fear index or VIX in the USA is at 34, which shows investors are worried but they’re not panicking, unlike some the of the journalists who scared the pants off some investors over the weekend.
Adding to fears was Belgium’s downgrade by S&P from AA+ to AA and a poor treasury bill auction for the Italians. These are reasons for concern and we now can only hope that the EU masters come up with a ‘master plan’ to sort out this mess.
In the USA, this week there’s a good run of data to tell us how the US economy is going. There’s house price info, consumer confidence, key manufacturing reports and the all-important jobs report.
Watch the economic snapshots
Locally, we will see new home sales, credit figures, home prices, business investment, retail sales, building approvals and a key manufacturing survey.
These economic snapshots of Australia and the USA will be important as it will show us if the US economic recovery is gaining pace and how badly we’re going, which will affect the December interest rate decision of the RBA, but everything plays second fiddle to what’s happening in Europe.
So how bad is this European mess? Bad enough to warrant some quick action from the European Central Bank and if we don’t see it soon, we could see GFC MkII!
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Published on: Monday, November 28, 2011
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