Harbour commentary: Waves of pessimism and optimism

The broad picture hasn't changed. Europe and the US have too much debt, and China is managing a transition towards urbanisation and raising domestic consumption.

The stakes are high as, despite the talk, Euro problems remain unsolved with a very real risk of civil unrest, and the prospect of a prolonged recession remains a real consideration. In addition, there are signs that Chinese property sales are lagging construction and that country's inflation battle has yet to be won.

In New Zealand, delays to Christchurch rebuild may be postponing recovery. We need hard data pointing to an employment recovery. The recent stronger building consent numbers are a good start.

Meanwhile, Australia's battle with a hot resources sector and a weak domestic sector carries both economic and political risks - and probably further earnings downgrades for retail, media and other domestic sectors.