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Some better US economic news

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by Peter Switzer

A nice rise on Wall Street and it was better economic news from both China and the US that helped the US market overnight. So, are we out of the woods with this latest pullback?

Probably not, as I suspect we will have to see how the US economy grows without QE2 and that finishes at the end of the month.

From China, industrial production rose a solid 13.3 per cent while retail sales were up a whopping 16.9 per cent. (My wife Maureen and I helped there as we were in Shanghai in May and we really gave the shops a real workout with our strong Aussie dollar!)

Over in the USA, retail sales fell for the first time in 11 months but it was a smaller fall than expected. It was only down 0.2 per cent and the big department store names did well on the market as a consequence.

Also, there were some inflation reads which again hosed down fears that inflation is rising and growth is going backwards which is reminiscent of the 1970s stagflation, which did nothing for stock prices.

Meanwhile, business inventories were up 0.8 per cent, which was less than expected but still the best result since October 2008, around the time Lehman Brothers failed and we knew we were in for a seriously rough time.

As I said earlier, the worst is not behind us but these positive days on Wall Street shows there are still plenty of buyers out there — all they need is to believe the US can grow and create jobs after QE2 stops. If not that, they need Bernanke to hint that QE3 is a real possibility.

Personally, for a real market take-off, we need to see the Yanks grow without the drip feed from the Fed.

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: Wednesday, June 15, 2011

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