Business News

Shock and awe at last!

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by Peter Switzer

What did I say? Europe needed some 'shock and awe' and some of the biggest central banks of the world finally said “Enough is enough”, and the Dow has put on nearly 500 points!

The sensational six that helped turn around markets and possibly pave the way for Santa to bring a rally to the stock market for Christmas were: the ECB, Federal Reserve, Bank of England and the central banks of Canada, Japan and Switzerland.

It’s thought that there was a European bank looking at a spot of balance sheet bother and so the big brothers of the banking system — central banks — came offering money to the system.

The Dow closed 490.05 points, or 4.24 per cent, higher to 12,045.68 and the S&P 500 gained 51.77 points, or 4.33 per cent, to 1246.96.

Now, this isn’t the endgame solution but it buys time and treats the symptoms of the budgetary and debt problems that have been troubling Europe.

Clearly the overtures by the PIIGS countries to address their budget largesse problems has made it more palatable for the central bank rescue and I reckon we’re now on the doorstep of progressive developments which will improve the situation in Europe.

As I say, we’re not there yet by a long chalk but each step towards dealing with threats to the euroland economy and the related banking system builds up confidence and makes investors return to stocks while chasing off the short sellers, the hedge fund villains and the bond vigilantes.

With a bit of luck, some bond vigilantes were ‘nuked’ this morning!

Meanwhile, the Yanks continue to see a better US economy with the Beige Book painting an improving picture of economic activity and the ADP private sector jobs report coming in unbelievably better than expected. Employment in the nonfarm private business sector rose by 206,000 in November.

It has to be a big day on the market today and lets hope we can have a nice rally into Christmas!

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.

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Published on: Thursday, December 01, 2011

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