The Experts

No news is bad news

Once again we’re in the hands of the eurozone officials, the Greeks and what the market smarties will try on between now and 17 June when Greece has its second shot at electing a coalition government.

Things are pretty worrying on one level according to my reading of London’s Daily Telegraph in Heathrow airport on my way to Milan. The paper talked about the Poms considering immigration controls to stop Greeks who might be trying to get out of town with their euros ahead of possible big job losses and bankruptcies if Greece elects a government that takes them back onto the drachma.

It was a bit of a beat up as the story said there were no discernible trends yet but authorities were not ruling it out. However, the point is we’re dealing with so much uncertainty and that is terrible for financial markets.

Oliver’s view

AMP Capital Investors’ Shane Oliver has an interesting take on where we are now.

“With share markets and related risk assets having fallen sharply over the previous three weeks, a lot of bad news has already been factored in, so the past week was far less dramatic in terms of market moves,” he wrote. “In fact, over the last week shares in Europe (+1.5 per cent) and the US (+1.7 per cent for the S&P 500) actually rose from oversold levels and share markets in Asia and Australia (-0.4 per cent) were only down slightly.”

He thinks, given what a Greek exit would cost the European Union, it would be cheaper to cop a debt write-down with the Greeks rather than gambling on the unknown of rattling the euro.

Oliver likes the Chinese response to the slowdown indicators we have seen lately and is confident that it will pursue stimulus policies and bring forth growth, avoiding a hard landing.

Out this week

Ahead this week there’s a truck-load of important economic data in the USA from manufacturing reads to the latest jobs report. I was happy to see Wall Street had a good week.

The Dow was down 0.6 per cent on Friday at 12,454.83 but was up 0.69 per cent for the week. The S&P 500 index was up 1.74 per cent for the week and it shows that euro-fears are being contained, at least for the moment.

On the local front we get a Reserve Bank Governor speech on Monday and retail, construction, investment, building approvals, credit and home price data over the rest of the week. This will help shape the RBA’s attitude to the timing of our next rate cut.

Over the week, news flow will drive the market and on Thursday there’s the Irish vote at a referendum on their fiscal plan, which could be interesting. I suspect we’re in for more of the up and down same stuff until the Greeks vote. I’m hoping the Europeans come up with a plan by 17 June or else there could be some serious market moves in the wrong direction.

Right now I’m thinking no news is bad news!

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Published: Monday, May 28, 2012