This week for investors and wealth-builders, as the old Channel Nine footy commentator Darrell Eastlake would have said, will be “HUGE!” And that’s despite the fact that there isn’t any real big market-moving data out in the United States.
In the States, the markets will be looking at earnings from the likes of Alcoa, JPMorgan and Google, while on the economic front there will be retail sales and consumer sentiment on Friday.
At home, there is a collection of data that will impact on the interest rate outlook and therefore the Aussie dollar. Remember, if some late mail comes in on Melbourne Cup Day that suggests we’re going to get an interest rate cut, then the dollar should give up some ground.
This week we have the NAB business survey tomorrow, housing finance and consumer confidence on Wednesday, and unemployment figures on Thursday.
Personally, I’m hoping for a rate cut to help the housing sector and all of the industries suffering the consequences of the patchwork economy.
A lower dollar would also help a lot of stocks, such as David Jones and other consumer discretionary businesses. But that said, our dollar could be pushed higher by the HUGE issues of the week.
Those issues pertain to Europe and the negotiations over Greece and its fellow PIIGS (Portugal, Ireland, Italy, Greece and Spain) whose debts are putting an enormous question mark over the European and world banking systems.
Meanwhile, the tiny European Union member Slovakia has yet to decide whether it will support its fellow members to bail out Greece. The Slovaks have an average income of $1,000 a year and aren’t keen to dedicate billions of euros to bail out the laidback Greeks.
The New York Times looked at the Slovakian reaction from the point of view of the younger generation.
Sebastian Petic, an 18-year-old law student in Trnava, repeated a popular Slovakian joke to the reporter: “For 500 euro, you can adopt a Greek. He will sleep late, drink coffee, have lunch and take a siesta, so that you can work.”
Fortunately, older Slovakians remember how times were under the thumb of Communism and see the EU as a generally positive experience.
The world economy, the global financial system and our shares rest on the votes of both Slovakian and Finnish politicians, but I suspect there is a lot of big EU country pressure to get these votes across the line.
All of this is important ahead of the EU Summit Meeting October 13-14 and it comes as both the German and French leaderships are backing recapitalisation of the banking system, though they don’t totally agree on how they will do it.
Also, the big banks such as ING are putting pressure on their European leaders to act, releasing a report called ‘Time for a European TARP/SCAP’, which argued that, “the market is requiring a more co-ordinated and accelerated re-capitalisation of the European banking system”.
Wisdom is starting to prevail in Europe and that will underpin a market rally, but recent history has taught us not to overrate the capacity of Europeans to solve their very European problems.
Over the next few weeks I expect huge and huger weeks to unfold, which will either create a HUGE rally or another big slide.
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.