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Calm descends on world markets as Europe crisis deferred

The ‘European problem’ has seemingly taken a further step to being forgotten…for the time being anyway.

On Bloomberg, European Central Bank President Mario Draghi says his strategy for battling Europe’s debt crisis is starting to work.

Reuters reports Spain and Italy spread cheer through euro zone markets on Thursday with solid debt auctions at sharply lower borrowing costs in 2012′s first real test of appetite for debt from the euro zone’s bruised periphery.

World sharemarkets responded with a collective yawn. They’re too clever to think this is the end of the crisis.

Still, all is relatively calm. The VIX, otherwise known as the fear gauge, sits at around 20, close to its long-term average. It suggests a market that’s not too hot, not too cold, but just right.

Investor sentiment, however, suggests otherwise.

Bruce McCain on Bloomberg said

“There’s improved optimism yet people still don’t want to take risk. We have become more sanguine about the problems in Europe and they still have a mess. That has the potential to take us by surprise and it’s not going to be a good surprise.”

The S&P/ASX 200 index has risen 5.5 per cent since it dipped below 4,000 on November 25. In the U.S., the S&P 500 has jumped 12 per cent. The moral of the story? High unemployment, massive indebtedness and ultra-low interest rates are no impediment to a rising market.

Poor old Australia. We’re missing out on all the fun. Not even the biggest resources boom in the history of mankind can seemingly help the lucky country’s sharemarket.

Just take a look at the 1 year performance of some of our leading resources stocks…

Company Name Market Cap % Price Change1 Year
BHP Billiton Ltd. (ASX:BHP)  199,652.4  (19.5)
Rio Tinto Ltd. (ASX:RIO)  124,803.2  (24.0)
Woodside Petroleum Ltd. (ASX:WPL)  26,887.6  (25.7)
Fortescue Metals Group Ltd. (ASX:FMG)  14,959.8  (30.7)
OZ Minerals Limited (ASX:OZL)  3,374.0  (38.8)
Alumina Ltd. (ASX:AWC)  3,044.1  (49.4)

Source: Capital IQ

And there there’s poor old QBE Insurance Group Limited (ASX: QBE). A few too many natural disasters have wreaked havoc on the QBE share price, sending it to an eight year low.

That hasn’t phased our Investment Analyst Dean Morel. After QBE’s share slumped, he recently named the company his new top pick of the ASX20, replacing his August pick of Telstra Corporation (ASX: TLS).

That may be of mild comfort to existing QBE shareholders. But investing is not about looking through the rear-view mirror. Today, Dean thinks QBE is a buy. Paddle forwards, Fools…

Speaking of mild comforts, Fairfax is reporting Australia and New Zealand Bank (ASX: ANZ) is expected to slash hundreds of Australian jobs in the first half of the year, as it seeks to cut costs in a weaker lending environment.

You’ve got to feel for the banks. They’ve ridden the massive housing bubble for all it’s worth. But the good times are over, and cost-cutting is now the name of the game. It might not be good news for banking staff, but I suspect ANZ won’t be the first big bank to cut staff. Thank goodness for the juicy banking dividend yields.

As if there was any doubt, this is a stock picker’s market.

Are you are looking for investing ideas for 2012? Request our free reportThe Motley Fool’s Top Stock For 2012Click here, whilst it’s still free and available.

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Disclosure: Bruce has an interest in ANZ and BHP.  The Motley Fool’s purpose is to educate, amuse and enrich investors. Click here to be enlightened by The Motley Fool’s disclosure policy.

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