Thank you America



By: YOSEF TASTASSA  
Published: December 3rd 2010
in Economics » World

Wall Street

Fantastic Rally in the market

 

As many of you noticed, the Dow-Jones and the NASDAQ were very Bullish in the last two days. Both indexes added over 3 per cent and the precise closure in New-York markets was 11,360.52 and 2,578.79 points respectively. The rally is quite surprising after a very "Red" November and high economic uncertainty in Europe. Let us try to understand what happened.

 

Macro data made a big difference

 

It's the end of the fiscal year and many macroeconomic figures are released to the public. Surprisingly most macroeconomic data were better than the analysts' estimations and the markets responded immediately and positively:

 

a. The US private sector added 93,000 new jobs in November. This is wonderful news for all households.

 

b. Retail sales surged – the aggregate increase of the 30 big retail vendors surged by 5.3 per cent. 1.8 per cent higher than the analysts' 3.5 per cent initial estimations. Thanksgiving sales were around $45 billion, an increase of 9.1 percent over 2009 sales.

 

c. Quantitative easing 2 – It seems that Bernanke's plan is working after all despite worldwide criticism.

 

d. Real estate – Deals in some US markets, especially in the south, surged by nearly 10 per cent. House prices are beginning to surge after several months of total freezing.

 

e. The most important data is that the "Fear Index" or the S&P VIX (Volatility Index) dropped by nearly 11 per cent. The drop in the index reflects confidence and an increasing certainty in the macroeconomics performance.

 

Macro around the world

 

The European Central Bank governor, Jean Claude Trichet, has announced that the basic interest rates in Europe will remain, at the level of 1 per cent and that the European Central Bank will continue to buy governments bond in order to increase the liquidity in the markets and boost the economy.

 

Spain, the letter "S" in the PIIGS states, has successfully raised funds through issuing governments bond to the public.

 

TSX

 

These were two wonderful days in Bay Street. The closure of the TSX Index was high above the psychological barrier of 13,000 points. The health care and the metal & mining sectors pushed the TSX Index to 13,163.53 points.

 

Nouriel Roubini

 

Whenever there is good news I listen to what the famous "Prophet" has to say about the markets. Roubini is still pessimistic and thinks that there is a chance of another recession in the future and that QE2 may not assist the American markets but it may boost the Chinese markets.



Related articles: (NASDAQ, TSX, Dow-Jones)


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