The Mood in Europe Is Even Gloomier Than in the U.S.

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Euro I have been in Europe for most of the last week and I can tell you that Europeans are not happy after so many European companies like BASF (PINK: BASFY ), Groupe Danone (PINK: DANOY ) and Siemens (NYSE: SI ) warned that demand is deteriorating and the cost of materials are rising, so profits might be squeezed in the upcoming quarters.

Additionally, Britain announced last Tuesday that its GDP growth is flat for the last three quarters: Up 0.2% in the second quarter, following 0.5% growth in the first quarter and a 0.5% drop in 2010′s fourth quarter.

The euro and the U.S. dollar are suffering from the debt crises in Europe and America. By comparison, most Asian currencies have been remarkably strong. This caused the central banks of South Korea and Thailand to intervene last week to prevent their currencies from rising too rapidly. In the meantime, the Australian dollar, Singapore dollar and Swiss franc hit new highs last week against the U.S. dollar. The Canadian dollar, New Zealand dollar and many Latin American currencies also remained an oasis last week. For instance, the Brazilian real reached its highest level to the U.S. dollar since 1999, despite $36 billion in central bank intervention in the past six months in a futile effort to stop the real's appreciation!

Last week, Germany's Finance Minister Wolfgang Schauble said in an open letter to members of his Christian Democratic Party that the euro-zone debt crisis is not solved; more fiscal discipline is needed, he said. Finance Minister Schauble also stressed that Germany would not write "blank checks" for distressed EU members.

Interestingly, Schauble cautioned against putting Italy and Spain in the same boat as Greece, which he described as being the root of the EU's financial crisis. But Italy and Spain are certainly not as healthy as Germany. Italy had to pay a 4.07% yield on 10-year bonds last week, up substantially from 2.51% at the previous 10-year auction. Still, Greece is in a category all its own! Last week, Moody's slashed Greece's credit rating three notches from Caa1 to Ca, just one notch above Moody's lowest possible rating!

Ouch!



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



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Louis Navellier

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