Now Spain takes centre stage
by Peter Switzer
The heartening development is the way the US market accepted the improving poll news in Greece, which suggests that a coalition might emerge that will keep the Greeks on the euro.
The good vibe headline for Wall Street is that it even ignored a weaker than expected consumer confidence reading to start the session up very strongly. This means that the market is rating the good Greek news above the question marks over Spain and its banks.
This explains why the VIX or fear index is only around 22, which is a good omen.
Too big to fail
Given Spain’s size, we have a genuine “too big to fail” country here and there is talk that the European Central Bank (ECB), the eurozone and the European Union (EU) all are looking at what needs to be done to shore up the banking system if Spain rocks financial market confidence.
The ECB has the potential to cut interest rates and increase its money supply, which will weaken the euro further and this will help the eurozone pick up some badly needed growth.
The Dow ended 125.86 points or 1.01 per cent higher while the S&P 500 index was up 14.6 points or 1.11 per cent to 1332.42.
The US continues to get mixed news with house prices up a tick — 0.1 per cent in March — but consumer confidence dropped to the worst level for four months. That said, it was expected.
Good news for BHP Billiton and Rio Tinto was China’s decision to put the foot down on more infrastructural programs, which should help commodity prices and share prices for the companies.
Against this, June is going to be a big month with US job numbers, an important ECB meeting, Chinese economic data, the Greek election and a crucial EU leaders’ summit all likely to either make or break the stock market.
All that said, Spain is now the main game and I hope the EU plays a really smart game!
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, May 30, 2012
The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.