I'm sick of sideshows...bring on the main event!
by Peter Switzer
Be clear on this — we are in sideshow territory!
The Dow was down 54.9 points or 0.42 per cent but the S&P 500 was off only a measly 0.12 per cent but, as I say, it is sideshow stuff.
The main show happens tomorrow night and it will start with the utterances from the European Central Bank’s Mario Draghi. It will then be followed up by remarks by other EU leaders, who could help or hinder stock prices. And then, on September 12, a German Court will determine if the European Financial Stability Facility — the key bailout fund — will get more money.
After helping out Greece, Portugal and Ireland, it’s down to 248 billion euro and it needs more! Another 703 billion euro could be needed for Spain and Italy but this would be pumped into the new bail out fund — the European Stability Mechanism. However, Germany’s constitutional court has not ratified the ESM as a legal entity.
This will be another anxiety issue for markets but there is a high expectation that the court will give it the thumbs up, though some argue more information might be requested — and this could mean delays.
This is not ideal and could stifle positivity that should come out of the ECB, which is expected to cut interest rates and outline how it will help bring down borrowing costs for the governments of Spain and Italy.
On the negative side, the latest ISM read showed manufacturing in the USA contracted at the fastest rate for three years in August. This does not surprise me as US economic data has been mixed as confidence has been rattled by the problems in Europe and this has knocked onto China and other fast-growing economies such as Brazil.
Thursday night is the main show and I’m not interested in sideshows after three years of bloody sideshows!
Published on: Wednesday, September 05, 2012
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