Business News
Rally rolls on
by Peter Switzer
The overdue words of Mario Draghi continued the stock market rally on Wall Street over the weekend but as I have argued on many occasions — words are cheap! If this rally is to be the real deal, actions are needed from the key eurozone countries’ leaders.
They got excited in the USA with the Dow up a whopping 187.73 points or 1.46 per cent to end at 13,075.66 and that’s the first time the index has beaten 13,000 since May.
The S&P 500 index was up 1.91 per cent to 1385.97 and the test of shareholder fear — the VIX — was under 17, which is a good omen.
Good ECB news
Helping the Yanks’ excitement was not only the European Central Bank’s (ECB) Draghi coming out with his pledge that the central bank boss of Europe will do “whatever it takes” to save the euro, but there’s an expectation that the Federal Reserve will move on QE3 which would be another round of money supply expansion.
Putting icing on the cake were reports that the ECB and the German central bank were having a top level pow wow on the euro, which added to optimism that a real rescue would be created for Europe, rather than the cheapskate versions that have had limited bang for the bailout buck.
There has also been some unity on the euro rescue from French President Francois Hollande and Germany’s Angela Merkel, which also helped the bulls on Wall Street.
For the statistical types, consumer sentiment was better than expected but it’s still at the worst level for 2012. And economic growth for the second quarter was 1.5 per cent, which was expected, but economists think GDP growth will rise from here.
So at this stage we’ve seen some nice rallies on the back of words and hopes but the test will come this week in the USA. The Fed meets Tuesday and then job numbers come out on Friday with both of these two big news items bound to make or break the market. In addition there will be a swag of other important economic data and major company reports, so a better picture of the US economy and business setting will be seen by week’s end.
Europe is the main game
On the local front we get to see how our economy is travelling with new home sales, building approvals, credit numbers, home prices, trade data, retail figures and tourist arrivals.
But the main game is Europe and this from The Associated Press has me excited: “German and Italian leaders issued a new pledge to protect the eurozone, while the influential eurogroup chairman was quoted Sunday as saying that officials have no time to lose and will decide in the coming days what measures to take…[to save the 17-nation eurozone]".
The words and actions this week could rev up the rally or kill it!
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Published on: Monday, July 30, 2012
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