Today is the Day!
by Peter Switzer
The financial world has been waiting for this day for around six weeks. Ever since European Central Bank President Mario Draghi uttered those words — “whatever it takes” – stock markets have gone higher, positive expectations have been built and now it’s D-Day. The decisions the ECB and the EU leadership have made better not disappoint!
To put the significance of Draghi’s revelations into context, they look like this:
- First, he deals with the high borrowing costs of countries such as Italy and Spain.
- Next, he adds to liquidity and brings interest rates down for banks, businesses and consumers.
- This in turn should not only pump up confidence but help investment as well as consumption.
- Next, EU growth rates should respond.
- This would help growth, confidence and investment in China and the US.
- And this would set the scene for stocks to go higher and, of course, help commodity prices and our stock market, as well as pushing the dollar higher.
That’s the good case scenario, so think the opposite if the Europeans dud us tonight!
And so we wait like Wall Street did last night with the Dow up 0.09 per cent to finish at 13,047.48, while the S&P 500 was down 0.11 per cent to end at 1,403.44.
At the moment there is speculation about what Draghi might say – the market could be setting itself up for an overreaction in either direction but with these sorts of statements sometimes the later analysis can turn a disappointing sounding story into a far more impressive one.
Still, the market’s initial response could be critical. If it’s good – and followed by better-than-expected jobs news in the US, which might be one wish too far – then there could be a big push on stocks.
However, the opposite could apply!
For those who need to know, US productivity in the June quarter was better than expected coming in at 2.2 per cent rather than the 1.8 per cent the experts guessed. However, that could mean less workers were employed and that marries up with some disappointing job figures over that quarter.
The last reading on US jobs was better than tipped and so confidence as well as support for Barack Obama will spike if another good number turns up on Friday.
We can only hope.
Published on: Thursday, September 06, 2012
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