The euro-monster is back!
by Peter Switzer
The Euro-monster is back! It’s spooking stock markets and it’s giving profit-takers a good reason to pocket profit and remain on the sidelines. Fortunately, what is happening isn’t knee-knockingly scary, at least for now.
Wall Street didn’t like the Eurozone troubles and the Dow gave up 44.04 points or 0.33 per cent to finish at 13,413.51 while the S&P 500 lost 8.27 points or 0.57 per cent to end at 1433.32.
Fear is building with the VIX up around 17 after being as low as 14 a couple of weeks ago.
The big issues were ugly protests in Spain and Greece where austerity measures are not popular. But these are linked to European Central Bank (ECB) help for Greek and Spanish bonds and so bond yields spiked overnight, the euro was mugged by the markets and oil fell below US$90 a barrel.
Markets are now wondering whether the ECB rescue plan will work if governments can’t win their populations over.
I always argued that the ECB plan was a good one but there was going to be a test on European leadership to make it all happen and at the moment it’s not looking encouraging.
There was nothing in the USA to offset the bad European Union (EU) news. New home sales backed off a little but they still are around two-year highs. This sector needs to do well and recent signs have been positive. Also mortgage rates are now around record lows, whereas 30-year fixed rates are around 3.5 per cent — how’d you like a rate like that?
Once again our share portfolios are in the hands of the EU’s political pygmies and so all you can do is hope that the leaders on the Continent can step up to the plate.
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: Thursday, September 27, 2012
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