Business News

Unbelievable! Good Greek news

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by Peter Switzer

Wall Street ended positive, which is a good sign considering the plethora of bad news around at the moment but I suspect our patience as well as nerves will be tested in coming weeks.

Right now we have question marks over the strength of the US economic recovery, which is looking a bit iffy, the Chinese recovery also looks less bullish than I would like and Europe is a basket case bound to spook investors.

However, European Union (EU) stock markets were up last night on some OK news out of Greece. But can we trust it? Remember the ancient warning — beware Greeks bearing gifts!

European stocks rose 0.66 per cent on a belief that the Greeks could form a workable coalition government. If they can, then maybe the debt rescue package would stay intact and Greece would stay in the eurozone.

Important point

Of critical importance to the EU, and the world for that matter, eurozone banks shot up 4.2 per cent overnight and this shows us the link between Greece, Spain, Italy, Portugal and Ireland and their debt problems to the banking system in Europe and effectively the world.

Now the Greek coalition talk still remains speculation but it shows how flimsy the past stock market rises this year have been, except for two things compared to last year.

The first is that there’s now more money in the European Financial Stability Facility to effect rescues of economies such as Greece. And second, the European Central Bank has lent three-year money at one per cent to vulnerable European banks, which has helped their balance sheets as well as their ability to withstand a debtor country problem.

Sell-off ahead?

For those looking to buy the dips, my charts guy, Lance Lai, told my viewers on my Sky News Business Channel program that the charts say the DAX — the German index — are screaming a sell-off is imminent and this won’t be ignored by other markets around the world.

I like the fact that the Dow finished up nearly 20 points or 0.16 per cent to 12,855.04 because it shows there are still buyers despite bad news, but they are getting thinner on the ground even in the USA. The big index has lost over 400 points in recent sessions, so things are touch and go.

I also like the fear index or VIX at 19, which is low considering what’s going on right now.

If we can believe a Greek coalition happens, then that will be a good thing for markets but there’s still a lot of work to do in Europe before we can sleep easy at night knowing our stock prices are more likely to rise than fall!

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.

Watch more from Peter on SWITZER TV.

Published on: Friday, May 11, 2012

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