Markets are Euro-nervous
by Peter Switzer
Markets got jumpy and Euro-nervous ahead of the Jackson Hole meeting tomorrow and the European Central Bank (ECB) meeting next Thursday, which could make or break this stock market rally.
Underlining how crucial Europe is to our stocks, overnight the Spanish Finance Minister said he would not ask for bailout funds until he knew the terms of the repayment deal, which is totally reasonable, but the market did not like it.
Why? It reminds us of how difficult it is dealing with these indebted European countries and their political pygmy representatives.
Now, while Wall Street dived lower, the key indexes did end above key resistance levels and so key players are still giving the ECB’s Mario Draghi the benefit of the doubt for next week. However, if Draghi and his EU-leader team disappoint, stocks will dive big time.
Such an event could spook investors, business and consumers, setting in train a deep economic slowdown in Europe that could infect the global economy. This is serious stuff and while markets will look to what the Federal Reserve’s Ben Bernanke will say tomorrow at Jackson Hole, Draghi’s utterances next week are far more important.
While the S&P 500 couldn’t hold the psychologically important 1400-level, finishing off 11 points or 0.78 per cent to 1,399.48, it did stay above a resistance level of 1397. The Dow lost 106.77 points or 0.81 per cent, but it did end above the 13,000-level at 13,000.71!
The Yanks had good economic news with consumer spending up 0.4 per cent in July, which was the best spike in five months. Personal income rose 0.3 per cent.
Right now the slowdown in China, the slump in iron ore prices and the ECB’s big day next week are worrying investors. But I’m gambling that these concerns will work out to the positive over the rest of his year.
S&P 500 jump?
Jim Paulsen of Wells Capital Management in the USA is very bullish tipping the S&P 500 hits 1500 this year. He pointed out on CNBC that to the Citigroup Economic Surprise Index “ has been moving straight upward” since July, which says economic reality has been beating expectations. He also backs China to see stronger growth as the year heads into the last quarter, which will be good for emerging economy stocks.
I’m on a unity ticket with Paulsen but we could be foiled by stupidity in Europe and so that remains the key issue to watch.
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Published on: Friday, August 31, 2012
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