European Debt Worries

Europe's sovereign debt worries has hit the spotlight once again yesterday, sending investors around the world to search for safety after voters in Spain provided a thumbs-down on further austerity measures and S&P's threatened to cut Italy's credit rating.

The Euro has lost at least 1% since its early May high. The help for Greece last year to get out of its debt contagion has been proven fruitless. In the midst of the traditional 'sell in May' prophecy, investors are getting jittery over global markets potential at the moment.

The Federal Reserve are adamant that they want to keep interest rates low to spur growth in the US. However, if the eurozone debt proves contagious, all of the US's effort in reviving the economy could be futile. Unemployment rates might have been falling in the US but it may just signal that those who were searching for jobs last year, might have stopped searching. Hence, these unemployment numbers might still pose a threat on the global recovery, after the worst recession the world has ever seen since The Great Depression.

Moving forward, retail sales have been bullish for the US since last Christmas. Auto sales proved resilient amidst negative outlooks for the automobile industry, the past year. With the relisting of General Motors back into the equity market, it has brought greater confidence for the industry players.

The only worry that the entire global markets now have is of the eurozone debt worries. Should the eurozone not tackle this contagion early, we could see a domino effect to the rest of the emerging markets. The effects will be greater volatility in commodity prices which will send business running into thinner profit margins. The cost of production will inevitably be passed on to the end consumer.

Back in Singapore, we have passed the post-GE2011 rally. A friend of mine asked before the last election hustings, whether it would be a great time to invest in Singapore index ETF's, before the election date just to make a quick buck. It was a calculated risk considering that the Singapore market traditionally makes a brief rally immediately after a GE. That is provided that the ruling party still hold a strong mandate - no pun intended.

For now till the month of October, I am bullish on the Healthcare , Consumer Discretionary and the Technology sector. Lets hope Apple post stronger-than-expected iPAD2 sales in the next earnings report.

Happy hunting.