On muted markets; mea QE culpa and running the gauntlet on Wall Street
“Treading water” might be the best description of the markets. With the monthly US labor report due today even the press has been muted in its enthusiasm. Incidentally, has it ever occurred to you to ask why, when stocks fall, they’re always full of telling us how much value was wiped off the index but when they rally sharply we’re never told how much they put on again?
Risk assets continued their march ahead on Thursday although it might be expedient to note that the Dow, at 11,123.33 points, still closed 30 points below the level at which it ended last Thursday and the S&P was only 4 points higher. Even the Dax with its huge gains is only 6 points better than it was on Thursday last and the FTSE, even with the fillip it received from the Bank of England’s renewed £75bn QE injection, is not quite 100 points higher on the week.
I certainly forecast the Bank of England incorrectly in terms of the timing of their announcement on another round of QE but it was a pretty binary call and hence I don’t feel overly guilty. However, the fact that the BoE was not prepared to step back in order to watch another month of eurozone foot-shuffling speaks volumes. Whatever solidarity there might have been between the British monetary authorities and its European peers is burnt out and Governor King looks to have decided to paddle his own boat. How well he has performed through the crisis is a moot point but I do have a sneaking feeling that the political will to face the music is a tad firmer in this country than elsewhere, whereby it may well be aided by the coincidental fall of the UK’s electoral cycle.
Back in mainland Europe, the numbers are getting bigger and bigger. Although asset prices are rising, so are the risks. The whole Dexia episode – or as much of it as has been played out so far – reminds us of just how fragile confidence is. Howard Wheeldon made a sterling point on the Beeb earlier this week when he reminded that when asking who is going to end up paying for all of this, all we have to do is to look into the mirror.
I agree with the Chancellor’s concern that when and if she finally says “Ja”, she will be committing several future generations of German taxpayers to resolving the financial mess which large parts of the rest of the Union find themselves in 2011
All the while France and Germany or, if you prefer, Mutti Merkel and Sarko are still like a cat and a dog (I’ll leave it for you to decide which of them is which) in their argument over where the limits of their respective countries’ support are to be set. Historically, France has been far more successful at committing Germany to spend money than Germany has itself but, throughout her tenure, Merkel been the first post-war Chancellor to cry “Nein!” louder and more often than a French President has cried “Oui”. This leaves France somewhat discombobulated for it has always done the morals while Germany has done the paying.
Many years ago I wrote a political piece in which I suggested that the EEC (it’s that long ago) was not much more than a disguise for a pipeline for pumping Deutschmarks from Bonn to Paris in order to compensate France for not being allowed another Versailles Agreement with its reparation commitments in 1945. Just last year I pointed out the new-found ability of the Germans not to do as France told them to and congratulated Mutti Merkel on her courage to step out of the shadows of collective guilt. The timing might have been unfortunate because it came just when German cash was needed more than ever, but I agree with the Chancellor’s concern that when and if she finally says “Ja”, she will be committing several future generations of German taxpayers to resolving the financial mess which large parts of the rest of the Union find themselves in 2011.
Given that we are still talking of cutting deficits and not of generating primary surpluses, for the problems yet to be created – Pandora has delivered a case full of boxes to Brussels, Paris and Berlin.
Meanwhile, the Occupy Wall Street movement is having a field day – not that too many fat cats are to be found in the grub of the colonial lay-out of narrow streets and alleys of lower Manhattan any longer. I don’t feel quite as resentful towards the protesters as I might do but, then again, I don’t have to run the gauntlet of abuse on my way to work in the morning. However, I disagree with them in that capitalism hasn’t failed at all. All it has done is to play through a more violent cycle of boom and bust than we have come to expect. Of course, it is through the investments and innovations of such capitalists as the Vanderbilts and the Fords that they have got to where they now are and through the makings of Edison, Bell, Gates and Jobs that they even knew of what is going on. How exploitative their Asian made trainers and hoodies are is another matter entirely. Well, mine is not to reason why…
Alas, it is that time of the week again and all that remains is for me to wish you and yours a happy and peaceful week-end. If you have entered the competition as to what my sign-off this week is going to be about and you tipped rugby again, you’re a winner. As Ireland (the iPaddys) meet Wales in the quarter finals, may the better side win and as France meets England, it’ll have to be about the less bad one progressing – I’ll watch both games, irrespective.
G’mar hatima tova.