President Obama Implores Europe To Act, Investors Expect Positive Headlines From Spain This Weekend (June 9-10, 2012):
For the first time in several months, President Obama took a decisive, firm stand on Europe and may have helped markets rise today. While the term “Obama Rally” is rarely used on Wall Street, today it seemed plausible as markets rallied right after the speech he gave around 11:00.
U.S. equities jumped in anticipation a resolution of some sort would occur this weekend for the Spanish banks that desperately need help. While Greece leaving the EU and euro common currency still seems likely, a “Spexit” (Spain leaving the euro common currency) would cause ripple effects across the globe due to the sheer size of the economy.
It’s unlikely President Obama would have made a speech today addressing the concerns in Europe without some knowledge that a deal was in the works and he may have been using the power of the White House to push EU leaders into working something out.
His reelection chances hinge on the performance of the U.S. economy and while there is still chance for him to become more Clintonian and work with Republicans, this seems highly unlikely. Extending the so-called Bush tax cuts or other measures to avoid a fiscal cliff would increase his chances of reelection resoundingly. Europe falling apart weakens his chances.
After a Scott Walker victory in Wisconsin and Mitt Romney raising more money than President Obama in May ($76 million Romney vs. $60 million President Obama), this could mark a changing point for the president if he sees his reelection chances waning.
Rarely does President Obama talk about market moving issues like Europe fixing its banking system so we think it’s possible more shifting from him is forthcoming. This would be good for markets long-run if more certainty and predictability allowed investors to make informed decisions.
We are watching developments across the pond via the foreign exchange markets that will be open all weekend. Stay tuned for timely updates as events occur. The financials, tech and small caps all made a comeback which suggest the market is poised to go higher if news from overseas doesn’t disappoint.
