Yesterday’s market run up demonstrates how pent up investors feel. Just a little good news from the big, global financial players and boom, 490 points added to the DIJA. True, other good economic news slipped in, but me thinks it had less impact. The singular issue has been and will remain the need for the European Central Bank to step up. Yesterday’s announcement from the central bank “playas” and today’s news suggests that it will, finally, do what needs to get done.
The new head of the European Central Bank signaled on Thursday it was ready to take stronger action to fight Europe’s debt crisis if political leaders agree next week on much tighter budget controls in the 17-nation euro zone. ECB President Mario Draghi signaled it was willing to take further action to prop up the euro zone economy in a speech to the EU parliament on Thursday.
That is all well and good, and perception is as important as reality in the market, but the time is fast coming where action is necessary. The question is: Will politics derail the efforts to stem the debt issues in Europe? Will those who work only to remain in office, to retain their power, scuttle the emergence of the “grand plan” to contain and master the debt problems in Europe?
The leaders of Chancellor Angela Merkel’s centre-right coalition agreed on Thursday that Germany’s opposition to common euro zone debt issuance was non-negotiable.
No doubt, Germany is a “playa” and a big one at that. The problem is the German public does not want its leaders to do anything more to help the weaker Eurozone countries, such as Greece, et al. The problem with that is the German public, like so many other “publics,” does not understand the reality of the situation. If the media there is as it is in the U.S., then the public there is ingesting bumper sticker news, shallow information that agitates rather than educates.
In any case, the news and market move yesterday created a belief that something will get done and get done soon. vidence for this comes in the form of investors taking risk …
Debt auctions in France and Spain gave some respite to battered euro zone bond markets on Thursday, attracting solid demand and at lower yields than previously feared.
So, if it turns out that the common sense trumps politics in Europe (and the U.S.) in the next week or so, we can all start looking to the economic fundamentals for market direction. As improved as those have been in the U.S. lately, the lingering influence of the European mess is a possible recession for Europe, which will impact the global economy. All signs are now pointing that way with the U.K., Germany, France, Italy, and Spain all contracting because of the loss of confidence and/or severe budget cuts.
As always, here is some good news to ponder. The might U.S. economy is still forging ahead with just a bit more steam. Construction spending is up month over month, U.S. manufacturing expanded in November at the fastest pace in five months, and it appears the U.S. Congress might actually extend the payroll tax cut into 2012. This last piece could be the best news of all, economically speaking, as many billions of dollars will remain with the consumer, which could mean more consumer spending on top of what is already happening in a big way.
Early reports by big U.S. retailers showed November sales were better than expected, buoyed by a strong turnout on “Black Friday,” the busiest shopping day of the year.
Trade in the day – Invest in your life …
