Not Eurotrash again!
by Peter Switzer
The recent rise and rise of Wall Street was KO’d by a disappointing outcome of the Paris summit between the leaders of France and Germany. And this letdown came when the Yanks got some better economic news, which could have sent the market higher.
I can’t recall the history of the unsavoury term — Eurotrash — but I know the Poms have used it at times when their cousins across the English Channel and beyond have come up with typical European decisions, actions or personalities that have ‘deserved’ this pretty in-your-face criticism.
Since the GFC, the handling of the challenges by European politicians have led me to tag their efforts as something you would expect from Eurotrash!
And it looks like the Sarkozy-Merkel summit has not done anything to change my view on this subject. And that’s why Wall Street has headed down.
- The Dow down nearly 77 points, or 0.67 per cent, to 11,405.93.
- The S&P 500 lost 11.73 points to finish at 1192.76
- The Euro-meeting came up with a financial transaction tax and an agreement that the fund set up to support members in debt/bond problems was sufficient. The market did not believe nor like these decisions, and they were also unhappy with the progress around talking about Eurobonds. The market responded as the market usually does. Funny that!
- Eurozone growth came in at 0.2 per cent for the quarter — that’s weak and less than the 0.3 per cent projected. Even Germany disappointed on growth, which is not a good sign but understandable given what has been going on in Europe.
- And in an ironic twist, the credit ratings agency Fitch kept the AAA-rating on the US!
- US retailers such as WalMart reported better than expected, which is a good sign.
- US industrial output was up in July and recorded the best growth for seven months, which is a really good sign and raises doubts over the double-dip driver of last week’s share market sell-off.
- Even housing starts were better than expected but they were half of what experts say represents a good state for housing.
One final positive omen — CNBC noted that insider buying is the biggest since, wait for it, 1998!
“There was an almost eight-fold increase in buy transactions over two weeks and a 16-fold jump during the last three weeks, according to Vickers Weekly Insider, which is published by Argus Research,” it reported.
News like that should hearten the long-term investor who buys quality stocks or managed funds when markets overreact and sell off stupidly.
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.
Published on: Wednesday, August 17, 2011
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