Courtesy of John Nyaradi.
Hope drives markets higher as Draghi, Merkel and Hollande all step up to save Euro
It has been a big couple of days in the Euro Zone as Mario Draghi, Angela Merkel and Francois Hollande all stepped up to say they would do whatever it takes to save the Eurodollar and the European Union.
Yesterday, ECB head Mario Draghi said he would do whatever it takes to save the Euro which was taken to mean another round of bond buying by the ECB to support Italy and Spain.
Today German Chancellor Angela Merkel and French President Francoise Hollande issued a joint communique stating that they, too, are going to do everything possible to save the Euro.
Markets reacted to the news with European indexes advancing and U.S. indexes following suit.
Approaching the noon hour in New York, the Dow Jones Industrial Average (NYSEARCA:DIA) was up .8%, the S&P 500 (NYSEARCA:SPY) was up 1.1% and the Nasdaq 100 (NYSEARCA:QQQ) advanced 1.3%.
Europe was also higher with the DAX rising 1.3% and the iShares MSCI Germany Index ETF (NYSEARCA:EWG) up 2.3% and the Euro up .67%. (NYSEARCA:FXE)
Offsetting the euphoria were reports that U.S. GDP slowed to 1.5% for 2Q, but beating estimates, University of Michigan consumer confidence coming in at the lowest level for 2012, and weak earnings for Facebook (NASDAQ:FB) and Starbucks (NASDAQ:SBUX) which set off short selling triggers on double digit declines.
Bottom line: Today’s pronouncements by European policy makers were nothing new and so markets are responding on hope alone that action might soon follow words. Rallies like today’s are typically short lived and so investors will be watching carefully for follow through on promises. If none is forthcoming, ongoing weak earnings reports, GDP growth, recession in Europe will cast a shadow over global financial markets.
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