Steve Goldstein, London bureau chief at MarketWatch.com reported today that U.S. stock futures are lower as the US market is still nervous over EU Nation’s debt burdens among other news, such as the unemployment claims report and Dubai’s debt repayment.
Today the Euro continued its downturn from the $1.31 level reached in the aftermath of the EU-IMF 750 billion euro aid package, retreating below $1.26. To make matters worse, a $980 million payment that the Dubai property developer must make today is also bringing the sovereign debt crisis back into the spotlight, the British pound also moved lower after the U.K. reported a widening trade gap, oil futures dropped below the $75 a barrel, and even gold was mildly impacted, with futures falling $4 to $1,239 an ounce. The entire MarketWatch article can be read here.
In an article written by Madelina Iacob, Forbes.com, she states that EU debt problems could cut US company’s profits. The prolonged period of slow economic growth that most analysts are predicting for Europe could also have a major impact U.S. companies with heavy exposure to the Euro zone. The austerity programs used to cut fiscal deficits in Greece, Spain and Portugal will reduce growth in those countries and limit demand from consumers and businesses. Since direct sales in Europe account for approximately 10% of overall revenues for S&P 500 companies, this could in turn have an impact on second half earnings.
Companies with the largest exposure to Europe are the most vulnerable. Industries such automobile manufacturing and materials, consumer durables, services, semiconductors, insurance and capital goods, food, beverage and tobacco are likely the most susceptible to this decrease in demand. Others sectors like household and personal products, pharmaceuticals and biotechnology would not be spared either. However, U.S. banks, telecommunications services, and transportation and utilities have less exposure to Greece, Portugal and Spain, putting them in far better shape to withstand a drop in sales overseas.
Perhaps even more worrisome than the negative impacts on U.S. corporations is that the austerity measures made necessary by the severe debt levels in the EU may be a preview of what's to come for the US. The entire Forbes.com article can be read here.
Associated Press writers Stephen Bernard and Tim Paradis reported on the U.S. job market. The stated that this week’s jobs report showed that gains in the job market are proceeding slowly. First-time claims for jobless benefits dipped to 444,000 last week from an upwardly revised 448,000 the previous week. This is the fourth straight week of decline in claim; however, it hasn't been enough to signal sustainable job growth. Economists estimate weekly initial claims need to fall below 425,000 to show employers are consistently adding workers. Claims have stalled around the 450,000 level throughout the year.
High unemployment remains a major obstacle to a strong recovery. The unemployment rate jumped to 9.9 percent last month, even though employers added 290,000 jobs. Investors want to see consistent job creation as well as regular declines in claims for jobless benefits before becoming confident that the labor market is healing. The AP article can be read here.
Thursday, May 13, 2010
Tuesday, May 4, 2010
PIIGS Get Slaughtered, Impacting US Markets
Stocks sank this morning after European debt problems sent another wave of pessimism through the market. European markets fell in response to uneasiness over whether a $145 billion bailout package for Greece will be approved by the 15 European Union members that would shoulder much of the cost. One concern among traders is that the size of the Greek bailout package could make it harder for the EU to rescue other countries that might need help.
How does this affect the U.S. Market? When the euro falls against the dollar, traders avoid the currency, which is used by 16 EU members including Greece. The euro hit its lowest level in a year. The U.S. investors are concerned that a stronger dollar would cut into profits for U.S. companies that heavily rely on foreign operations. When the dollar is up over the euro, overseas profits translate into less money.
The Greek debt problem is making a big impact on the markets this week, and the fallout is still far from over. There is a concern that the Greek contagion is beginning to spread to the other PIIGS. Last week, Standard & Poore’s (S & P) announced a cut to Portugal’s sovereign credit rating from A+ to A and cut Greece’s bond rating to BBB+. Following that, Spain saw its credit rating slashed, too. The Greek debt crisis has been described an economic virus, spreading among the PIIGS and triggering the euro's slide.
Day to day it's hard to keep track of all the commotion related to Europe's economic problems. Greek labor unions balk at a bailout; German politicians are stalling on their role in approving a bailout based on domestic political pressures; and some market economists argue in favor of allowing Greece to default rather than seeing through an expensive bailout package.
All the fluctuation in the markets related to the euro and the Greek debt crisis may be far from over, too, even though the EU is talking in terms of the "finishing touches" on a bailout package. On Thursday, Barclay's Capital wrote "We believe the move toward a Greek rescue package will remain a slow grind and a weight on the euro." One of the reasons given to expect more ups and downs was the political situation in Germany. Of course, the looming debt crises in Spain and Portugal have not helped, either. It's still an open question this week whether after months of back and forth over the path forward for Greece, the EU will be able to pull together and bring Greece back from the unplanned-for crisis in 2010.
Some are asking the critical question. Will the euro collapse in 2010? No one can say what exactly will happen going forward. Government structures stay in place for a long time, the US is still on its feet, for the time being. Other countries have defaulted on their loans and are still here. In the highly developed West, that is almost a given. So while the EU may not dissolve, when all this is said and done, its governmental structures will have definitely been altered.
How does this affect the U.S. Market? When the euro falls against the dollar, traders avoid the currency, which is used by 16 EU members including Greece. The euro hit its lowest level in a year. The U.S. investors are concerned that a stronger dollar would cut into profits for U.S. companies that heavily rely on foreign operations. When the dollar is up over the euro, overseas profits translate into less money.
The Greek debt problem is making a big impact on the markets this week, and the fallout is still far from over. There is a concern that the Greek contagion is beginning to spread to the other PIIGS. Last week, Standard & Poore’s (S & P) announced a cut to Portugal’s sovereign credit rating from A+ to A and cut Greece’s bond rating to BBB+. Following that, Spain saw its credit rating slashed, too. The Greek debt crisis has been described an economic virus, spreading among the PIIGS and triggering the euro's slide.
Day to day it's hard to keep track of all the commotion related to Europe's economic problems. Greek labor unions balk at a bailout; German politicians are stalling on their role in approving a bailout based on domestic political pressures; and some market economists argue in favor of allowing Greece to default rather than seeing through an expensive bailout package.
All the fluctuation in the markets related to the euro and the Greek debt crisis may be far from over, too, even though the EU is talking in terms of the "finishing touches" on a bailout package. On Thursday, Barclay's Capital wrote "We believe the move toward a Greek rescue package will remain a slow grind and a weight on the euro." One of the reasons given to expect more ups and downs was the political situation in Germany. Of course, the looming debt crises in Spain and Portugal have not helped, either. It's still an open question this week whether after months of back and forth over the path forward for Greece, the EU will be able to pull together and bring Greece back from the unplanned-for crisis in 2010.
Some are asking the critical question. Will the euro collapse in 2010? No one can say what exactly will happen going forward. Government structures stay in place for a long time, the US is still on its feet, for the time being. Other countries have defaulted on their loans and are still here. In the highly developed West, that is almost a given. So while the EU may not dissolve, when all this is said and done, its governmental structures will have definitely been altered.
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