Social Unrest Will Be A Problem

Published by Filipe R. Costa on Wed, 26/09/2012 - 10:30
spain bull

Daily Market Commentary for September 26: Positive consumer confidence data in the US was not enough to save a major decline in equities. Spanish unrest and Federal Reserve of Philadelphia President Charles Plosser all pressured equities down.

Charles Plosser came to say that QE3 won’t boost economic growth or bring down unemployment as much as many think. Basically, QE3 is seen as a fatality that had to occur but won’t do much for the US economy. Hedge funds, investors and many other market participants have been raising doubts about QE Infinity effectiveness and it is becoming apparent that to boost stocks, some good earnings figures will be needed as investors seem to have learnt the lesson from the past. The Fed is trying to artificially boost prices and will ultimately generate inflation and possible a bubble.

In Spain, a conflict is starting to rise. Government has to implement austerity measures as requested by the EU but people aren’t giving Rajoy’s government much space for it as they are fighting against on the streets. The European leaders aren’t aware of the risks of this social unrest, especially in Spain, where there are many regions that will get the first chance to fight for independence as is the case with Catalunia.

With a grey picture behind, the Dow ended with a triple digit loss, retreating 0.79% to 13,457. The FTSE edged higher to 5,859 but is currently trading at 5,797, down more than 1% from yesterday’s close. The latest developments in Europe aren’t inspiring and the picture for the Euro isn’t bright while the social unrest mounting in Spain and Portugal. Although Angela Merkel and Mario Draghi thought they had calmed markets with the ECB move, problems have just started again. Austerity measures were a failure as yesterday seen by data reported in Portugal and there is a need to put the focus on growth otherwise Europe may enter a deep and prolonged crisis.

Name Last price Close Price % 5-Day % YTD %
Gold (LBM) $ 25/09/2012 177220 0.54 0.02 13.1
CAC 40 25/09/2012 3513.81 0.47 0.03 11.2
IBEX 35 25/09/2012 8175 0.45 1.45 -4.57
FTSE MIB 25/09/2012 15932.5 0.41 -0.89 5.58
FTSE 100 25/09/2012 5859.71 0.36 -0.14 5.16
Nikkei 225 25/09/2012 9091.5 0.25 -0.35 7.52
DAX (Xetra) 25/09/2012 7425.11 0.16 1.05 25.88
EUR/GBP - £ per Euro 25/09/2012 0.7966 -0.13 -0.82 -4.39
GBP/USD - US $ per £ 25/09/2012 1.6192 -0.2 -0.32 4.26
EUR/USD - US$ per Euro 25/09/2012 1.2899 -0.32 -1.13 -0.42
Dow Jones Industrial Average 25/09/2012 13457.5 -0.75 -0.79 10.15
S&P 500 25/09/2012 1441.59 -1.05 -1.21 14.63
Crude oil (Light Sweet) Composite 25/09/2012 9095 -1.22 -4.79 -8.13
Nasdaq 100 Index 25/09/2012 2804.53 -1.39 -1.85 23.12