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Wall Street has had enough

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by Peter Switzer

Greece again took its toll on Wall Street’s enthusiasm but US investors weren’t helped by some disappointing economic news. But while these had some possible bearing on the stock market, I reckon Greek fatigue is taking control as the ratings agency Fitch threw its two pence in.

The VIX or fear index is creeping higher and that’s not a good sign and another Greek election hasn’t helped. That said, George Boubouras — yes a Greek! — but he is also a hotshot market analyst thinks the second election will see his fellow countrymen come to their senses and a workable coalition government will result.

In fact the month gives good sense a chance to be given plenty of exposure. AMP Capital Investors’ chief economist Shane Oliver points out Greek surveys show 80 per cent of Greeks want to stay with the euro while nearly the same number don’t want the austerity dreamt up by the Germans!

Wall Street overnight

Anyway back to the overnight story.

The Dow dropped 156.06 points or 1.24 per cent to 12,442.49 while the S&P 500 gave up 19.94 points or 1.51 per cent to finish at 1,304.86.

Fitch’s action to downgrade Greece from B- to a CCC borrower followed the European Central Bank saying it has stopped providing liquidity to some Greek banks. This is serious stuff and the economic reality of bank runs, bankruptcies and unemployment needs to be explained to sensible Greeks ahead of the election on June 17.
Not helping was news that Moody’s is set downgrade Spanish banks after doing the same to 26 Italian ones recently. This didn’t help Spain’s 10-year bond rates, which went over six per cent.

Adding to the negativity was the first fall in US leading economic indicators in seven months and the Philly Fed survey — a good economic activity reading — disappointed as well.

Watch gold

I have to say I’m a little spooked to see gold go up two per cent overnight to US$1570 as it could be the start of “safe haven” buyers heading for the exits. This bears watching.

At the moment the stock market stayers are leaning against the sellers but the serious hedge funds and short-sellers haven’t made a big play yet and that’s because they haven’t got the confidence of last year when the ECB did nothing, however we’re in tricky territory.

Facebook’s listing at US$38 is interesting and how it fares tomorrow will be intriguing. For us I suspect our market will be down today but that’s investing life until Europe grows up and faces reality. Let’s hope that starts on June 17.

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: Friday, May 18, 2012

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