Morning Note - ?? over stress tests

by James Gerrish 26 July 2010

26/7/10   - 7.47am   -  by James Gerrish 

The bank stress tests in Europe were always going to be contentious with the market skeptical of the whole process. The main goal of the tests were to improve confidence - particularly the confidence between banks so they'd lend to each other again and the wheels of industry would start rolling. 

Whether this will happen or not only time will tell however from the initial reports I've read  suggest the main concern is that the tests were not hard enough. This is obviously the pessimistic line of thinking while the optimists among us should be delighted that the banks didn't need as much capital as we were expecting and things are in better shape than we thought. When you think about, European Banks have already raised more than 220 billion euros over the last 18 months and according to Credit Suisse, this is the reason that the tests came out in a positive light. 

I've been slowly becoming more optimistic so I'm going to hang my hat with the optimists, however if the market action is anything to go by on Friday, it appeared that everyone was a little confused with the FTSE 100 finishing flat on the session after having tentative tilt in both directions. 

Over in the US, the market got a shot in the arm when General Electric raised its dividend back towards historical levels showing a strong vote of confidence in the sustainability of the recovery. This is a major move, particularly given the vast scope of GE’s operations and exposure to many sectors of the US economy.  I've been reading a lot about the amount of cash being generated by corporates in the US as well as locally. Last week when Fortesque Metals released its quarterly production report it said that it had generated 500 million in cash in the last quarter and is on track to fund its significant expansion plans from its own cash flow - quite staggering! 

On Fridays session, the DOW JONES added +102.32 points or +0.99% to 10124. The FTSE 100 lost -1 point or 0.02% to 5312. Locally, SPI FUTURES are suggesting that we'll open 43 points higher this morning. 
 

Disclaimer

James Gerrish is an Authorised Representative (Rep No. 352904) of Shaw Stockbroking Limited ("Shaw Stockbroking"). Shaw Stockbroking is a holder of Australian Financial Services Licence No 236048. Shaw Stockbroking, its directors, officers, associates and employees each declare that they, from time to time, may hold interests in financial products and/or earn brokerage, commission, fees or other benefits from financial products mentioned in this e-mail or attached documents. Unless specifically stated within this page or an attached document, any information communicated by this e-mail constitutes unsolicited general financial product advice which has been compiled without regard to any investor's individual objectives, financial situation or needs. It is not specific advice for any particular investor. Before making any decision about the information provided, you need to consider the appropriateness of this information having regard to your individual objectives, financial situation and needs and consult your adviser. Any indicative information and assumptions used here are summarised and also may change without notice to you, particularly if based on past performance or relate to a future matter.
 

Subscribe to our Daily Newsletter?

Would you like to receive our daily news to your inbox?