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!