OK news out of Europe
by Peter Switzer
What Europe giveth, Europe taketh away. That’s where we are right now but the leaders of the European Union did enough to keep Wall Street largely positive overnight.
The Dow was up 33.6 points or 0.27 per cent to 12,529.75 while the S&P 500 index was up 1.82 points or 0.14 per cent to 1320.68, which all up was not bad with the question marks hanging over the eurozone and its potential impacts on markets.
Italy and Germany
Two positives came out overnight in relation to the Greek-euro drama. The first was that the Italian Prime Minister, Mario Monti, said there was a lot of support for eurobonds, which could be a way to spread the risk of the dodgy governments of Europe across their more solid co-members in the eurozone.
But even more interesting was this from Germany’s Bundesbank: “It said a euro exit would pose ‘considerable but manageable’ challenges for its European partners, raising pressure on Athens to stick with its painful economic reforms,” Thomson Reuters reports.
I should also say I like the way the banks around the world are standing up pretty well with these Greek question marks having the potential to rattle the financial system.
It’s also good to see that Wall Street has beaten a sharp negative start to end in positive territory, which says ‘smarties’ are betting that the Greek drama won’t end up in tears for the eurozone. This is a big bet but an intriguing one!
Another positive I picked up on CNBC came from an assessment by Ed Yardeni, a former Fed economist who sees four reasons to be bullish on stocks.
The first was the recent US earnings, which were up eight per cent and these were better than expected. Analysts thought the rise would be two per cent. He likes the US economic recovery and he thinks the fall in the price of oil is the big story. Finally, he notes that sentiment is currently bearish but historically this has been a good omen for stocks!
One other positive I picked up this week came from Christine Lagarde, the new boss of the International Monetary Fund, who told the UK they should consider some quantitative easing to help it beat its current recession. I think the eurozone will be working harder for growth and that will help stocks.
Yardeni says a correction could be on the cards but he doesn’t see an end to the bull market.
I like that kind of talk when it comes from someone with credibility.
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Published on: Friday, May 25, 2012
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