Germany’s Constitutional Court gave a green light on Wednesday for the country to ratify the euro zone’s new rescue fund and budget pact but gave parliament veto powers over any future increases in the size of the fund.
Okay, that’s one thorn removed from the market’s side. The German court did the expected thing and immediately positive results happened.
Italy’s one-year borrowing costs dropped to their lowest since March on Wednesday after Germany’s top court gave a green light to the euro zone bailout fund and the ECB’s new bond-buying plan, reinforcing views the country is becoming a safer bet.
So, now we can move on to the next thorn in the side of the market, and that would be the awaited words from the Federal Reserve regarding QE3. Will they or won’t they launch QE3? It appears this is now the larger question for the market, but, like the German court ruling, it might just be the suspected outcome is already baked into the cake. Now, if the Fed does not deliver on QE3, the market might be upset, and that cake will come right out of the oven, finished or not. This might explain the market’s tepid upward movement today …
China drew a record $116 billion in foreign direct investment last year. The Commerce Ministry aims to attract an average of $120 billion in each of the next four years. It is roughly on course to hit the target in 2012.
How bad could the Chinese economy be if foreign investment money is pouring into the country at a record pace? Once again, pay no attention to the breathless media and the knee-jerk commentary from those who should have a longer view than one negative report at a time. China has the will and the firepower to rebound and the big-money folks know it.
Caterpillar, the world’s largest maker of construction equipment, expects a $157 billion Chinese infrastructure spending drive to feed through to its sales next year, boosting its operations both locally and in North America.
The above (Europe and China) speaks to a number of opportunities in the market. As well, the broad fiscal/political improvements in Europe and the coming economic improvement in China point to support for the global economy, which means a raft of potential market opportunities.
For the last 40 years the MSCI world index has lost 0.9 percent on average in September, making it the worst performing month for the stock market, according to data from Thomson Reuters. So far, the index, a broad measure of global equities, is up 2.6 percent this month.
One thing to watch for, though, is that with global economic improvement (and geo-political strife), oil prices will rise, which could put a damper on global growth, as well as have an impact here in the US.
Import prices rose in August for the first time in five months as the cost of imported oil jumped, a factor that could weigh on American consumers and fuel higher inflation.
Nevertheless, with one big thorn removed today, look for a happier market, at least in the near term, or, until the next thorn is removed, or not …
Trade in the day; Invest in your life …
