European debt concerns carry over to 2012
We know you’re probably tired of hearing about Europe’s debt crisis, and frankly, we don’t blame you. At risk of sounding insensitive to the struggles of our European neighbors, we’re tired of it too. While there are benefits to globalization, there are also drawbacks as evidenced by the unprecedented level of negative influence Europe’s financial issues have had on us in recent years.
As we look at last week’s activity, we can see the affect Europe is having yet again. While all three indexes ended the week in positive territory, recent gains came at lower-than-normal trading volumes as wary investors dipped their toes in the water, but were afraid to dive in.
Stocks finished in the red Friday on expectations that nine Eurozone nations would be downgraded by S&P (and they were shortly after trading hours), including AAA-rated France and Austria. Italy was lowered two notches to BBB+, dangerously close to junk bond levels that could make it even more difficult for the government to raise money. Here’s the report card :
France – AAA to AA+
Austria – AAA to AA+
Slovenia – AA- to A+
Slovakia – A+ to A
Spain – AA- to A
Malta – A to A-
Italy – A to BBB+
Cyprus – BBB to BB+
Portugal – BBB- to BB
While investors have been expecting this downgrade since S&P issued a warning last month, the news is still a harsh reminder that Europe is not out of the woods. It is not yet clear how hard the downgrades will hit markets, but it is likely that we will continue to feel Europe’s influence until this situation is resolved. On the bright side, leaders from Germany, Italy, and France have been sounding upbeat about proposed solutions. We hope their optimism will promptly translate into concrete actions.
When any set of circumstances has the potential to affect your financial situation, we are committed to monitoring it closely and to keeping you informed. Please rest assured that the European debt crisis is no exception.
ECONOMIC CALENDAR:
Monday – U.S. Holiday: Martin Luther King Jr. Day
Tuesday – Empire State Manufacturing Survey
Wednesday – Producer Price Index, Industrial Production, Treasury International Capital, Industrial Production, Housing Market Index
Thursday – Consumer Price Index, Housing Starts, Jobless Claims, Philadelphia Fed Survey
Friday – Existing Home Sales
Notes: All index returns exclude reinvested dividends, and the 5-year and 10-year returns are annualized.
Sources: Yahoo! Finance, MSCI Barra. Past performance is no guarantee of future results.
Indices are unmanaged and cannot be invested into directly. N/A means not available.
HEADLINES:
The average price for a gallon of regular unleaded gasoline in the United States on Monday was $3.39, according to motorist group AAA. That's nearly 30 cents higher than a year ago. The national average reached a peak of $4.114 in July 2008.
Saudi Arabia can make up for any loss of crude oil production if sanctions are placed on Iran, the country's oil minister told CNN in an exclusive interview set to air Monday. "I believe we can easily get up to 11.4, 11.8 (million barrels a day) almost immediately, in a few days, because all we need is to turn valves," Saudi Oil Minister Ali al-Naimi told CNN's John Defterios. "Now to get to the next 700 or so, we probably need about 90 days."
Consumer sentiment this month hit the highest level since May, with both current and future economic conditions seen as improving, according to data released Friday by the University of Michigan and Thomson Reuters. The consumer-sentiment index reached 74 in the preliminary reading for January, compared with 69.9 in December.
U.S. defense leaders are increasingly concerned that Israel is preparing to take military action against Iran, over U.S. objections, and have stepped up contingency planning to safeguard U.S. facilities in the region in case of a conflict.
QUOTE OF THE WEEK:
“never forget that doing what you love is the cornerstone of having success in your life” Dr . Wayne Dyer
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