Business News

Wall Street down. What’s new?

| More

by Peter Switzer

The best thing we can see this week is a market selloff because we need the EU nincompoops who meet at the Summit later this week to be prompted to get real. Until they do, we will be a victim of these daily challenges from Wall Street and European stock markets.

Overnight the UK FTSE was down 1.14 per cent, the French CAC 40 dropped 2.24 per cent while the German DAX lost 2.09 per cent.

Ion-Marc Valahu, a fund manager at Clairinvest in Geneva, got it right when he told Reuters, "EU leaders have waited for so long to implement any changes that the situation is almost out of control and affecting nations across the world”.

We’re being buffeted around by short-term traders who love this kind of instability and uncertainty, and only this weeks Summit can help to give markets some positive direction.

Overnight the Spaniards finally woke up and confronted reality, requesting a formal bailout of its banking sector and this hurt bank stock prices.

Wall Street overnight

On Wall Street, Europe’s capacity to undermine global growth is the new concern and undoubtedly the EU region’s problems are already undermining UIS growth.

The Dow lost 138.12 points or 1.09 per cent to finish at 12,502.66 while the S&P 500 index lost 21.3 points or 1.6 per cent to end at 1313.72.

In a nutshell, we’re in a down zone until the EU summit, and if the leaders come up with the same crap, we will go lower. On the other hand, if they shock us with a genuine, credible plan for dealing with their debt and economic growth challenges, then this stock market malaise could be replaced by optimism and rising stock prices.

This is a big expectation given the EU’s appalling track record.

Lack of leaders

Regular readers know my point of view, and that is the current slide in share prices is a buying opportunity for the long-term investor but the lack of progress out of the EU is staggering and it shows how countries right around the world lack real leaders.

We are being run by a bunch of second-raters like I have never seen before and that includes President Barack Obama — he seems powerless to neither bully or wisely influence the leaders of Europe — and his international ineffectiveness seems on par with his impact at home.

This is disappointing because his pre-election speeches promised so much.

The good news

Anyone who needs to hear some good news, well new home sales hit the best level since April two years ago with experts arguing that this improvement is real and market driven and not encouraged by government incentives as it was in 2010.

That accepted, the EU is in the driver’s seat but the question is — where are they driving us?

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: Tuesday, June 26, 2012

The Switzer Super Report is a newsletter and website for self managed super funds. With exclusive commentary from Peter Switzer and Paul Rickard the Switzer Super Report will help you maximise your after tax investment returns and grow your DIY Super. Click here for a free trial or subscribe today.

Why Aussie stocks lag Wall Street

Kill QE, kill rally? Nope!

Dow to reach 20,000 – can you believe it?

It’s not All Too Hard, it’s More Joyous!

Abbott deserves a Tony Award for that speech!