Business News

Jobs and elections will hurt share prices

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by Peter Switzer

Expect a week of volatility with a disappointing jobs report in the USA spooking Wall Street, and the results of elections in France and Greece to reflect an anti-German austerity trend in the EU.

What that means is if voters reject the fiscal discipline needed to satisfy creditors, and they don’t meet their debt repayments, it would result in bankruptcy as well as an exit from the euro in the case of Greece.

Over the weekend the poor jobs figures in the US took the Dow down 168.32 points or 1.27 per cent to 13,038.27 while the S&P 500 lost 22.47 points or 1.61 per cent to finish at 1369.10.

For the year the Dow is up 6.72 per cent, the S&P 500 is up 8.87 per cent and the Nasdaq is up a whopping 13.48 per cent but it’s losing momentum as question marks over the economic recovery emerge.

In a nutshell US economic uncertainty would be added to with eurozone uncertainty and that will show up in the stock market.

Of course, I have been predicting a sell-off was to be expected given the big start for stock markets worldwide this year and now the real testing point has arrived.

To understand what is happening, have a look at Apple’s share price. Not long ago it was $644 and now it’s $565. That’s around a 12 per cent decline and this stock has been a big driver of the indexes this year. The technical analysts tell me that it’s now below its 50-day moving average, which is a bearish sign.

Thankfully company profit reporting has been better than expected with 67 per cent of companies out of the 415 that have reported in the S&P 500 index beating the Street’s guesstimates.

Throw in the election uncertainty from Europe and now two of the big market movers — the US economy and Europe’s struggle with debt — have turned sour while the third one — the Chinese economic recovery — still looks to be a positive.

Ahead this week we have the Budget and that will dominate local market news but I suspect the stock market will attract a bit of attention given what we’ve seen over the weekend.

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: Monday, May 07, 2012

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