Magical turnaround in sentiment
by Peter Switzer
Like magic, market sentiment has turned around with Wall Street and European stock markets up nicely in total contrast to the fear and loathing yesterday. So, what gives?
Well, two of the flies in the ointment — Spain and China — came out with decisions that impressed the investing community who determine the course of share prices.
Let’s go to the scoreboard with the Dow up 72.46 points or 0.54 per cent to 13,485.97 while the S&P 500 was up 13.83 points or 0.96 per cent to 1447.15.
Over in Europe the German DAX put on 0.19 per cent while the French CAC 40 was up 0.72 per cent.
That was then, this is now
The rises on Wall Street were even more impressive as a guide to investor attitude as the Yanks shrugged off economic data that could have hurt stock markets last year.
Kicking off the bad economic news was GDP, which came in at a weak 1.3 per cent growth rate and explains why the Fed went with a third round of quantitative easing (QE3) now. And to add insult to injury, durable goods orders slumped and pending home sales fell as well but it was because of a lack of stock to sell, which is a good sign for house prices.
This will feed into consumer confidence and is a turnaround sign but the USA needs a whole lot more, and again, that’s why they got QE3.
Against the bad news, jobless claims dropped to the best level in three months.
The only bright spot in today's slew of economic data was the weekly jobless claims figure. Claims for unemployment benefits fell to the lowest level since July, according to the Labor Department, while the four-week moving average for new claims snapped five straight weeks of increases.
Good news from China
In the good news department, the Shanghai Composite spiked in late trade when reports predicted a big Chinese government stimulation program and this coincided with China’s central bank making a massive injection of money into the economy last week. CNBC says it was the biggest in history at US$57.9 billion.
Meanwhile, Spain outlined its budget plan for 2013 where spending cuts were favoured over tax increases and the markets liked what it read about it. There were 43 new laws proposed to change the economy and a plan to bolster liquidity.
Working against this good news are revelations due out tomorrow on the capital position of Spanish banks. The news could help or hinder markets.
All of this aside, the Chinese news should help local stocks today.
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Published on: Friday, September 28, 2012
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