Europe Weighs on Global Markets, Will Bulls Lift U.S.?

Index and index ETFs finished flat and confused yesterday despite European jitters.

Major indexes and index ETFs finished flat and confused yesterday despite an eventful weekend across the pond.  With France and Greece having changed power to officials who directly oppose further Eurozone austerity measures, one wonders firstly how the Eurozone might survive with anti-Euro and anti-austerity forces in government, and secondly why US markets did not take a nosedive in reaction to a potentially weaker, more volatile Eurozone?

Investing Insights: ETF Investing Signals>>

Oil, on the other hand, heeded the European mess and continued to drop to its three month low; the United States Oil Fund LP ETF (NYSEARCA:USO) responded in kind by shedding off .67% today.

US markets did not seem to care however, at least not yet, about the tremors in Europe, as the SPDR S&P 500 ETF (NYSEARCA:SPY) gained .07%, while the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) lost .19%.  The PowerShares QQQ Trust Series 1 ETF (NASDAQ:QQQ) gained .09% while the iShares Russell 2000 Index ETF (NYSEARCA:IWM) gained .27%.

Perhaps yesterday’s markets were propped up by the positive Consumer Credit report released yesterday, which indicated that consumer credit has increased by 7.75% for first quarter 2012, a positive number no doubt, but nonetheless still an indicator reminiscent of the fact that the entire world right now is working on credit, debt, and near zero growth.  At least, as indicated by the positive Consumer Credit report, people feel more confident about paying their debt back, which suggests that although our recovery is fragile, credit is still flowing and growth is still a half-alive notion.

Bottom Line: Europe needs to somehow keep its credit pumping too, however with a direct “NO!” to further austerity measures and tighter fiscal union as voiced to the Eurozone via French and Greek election results, the path to more bailouts (credit flow!!), growth, prosperity, and a debt free Eurozone will likely be a very long process.  In the meantime, we need to continue our defensive position as we expect lower prices ahead, as any hick-up in Europe and around the world should and likely will directly impact markets and economic recovery at home.

John Nyaradi is the author of The ETF Investing Premium Newsletter.