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Markets are called flat this morning. This is what's happening today:
We saw the 10-year Spanish yield trading above 7% yesterday. The markets were down 1/2% on concerns of a slowing global economy. Data today continued to show that China is being effected negatively by what is happening in Europe as both imports and exports are slowing. This is understandable since the Chinese economy depends on its exports to developed economies and with the problems in Europe, demand is slowing. China is still growing at a decent rate above 8% and the Chinese government can adopt expansionary monetary policy to stimulate the economy.
The main problem to the global slowdown remains Europe. Reports are forecast to show manufacturing is shrinking in France and Italy. Until we see the the ECB and the European heads of state work to solve the European problems, the markets will remain volatile and all this uncertainty will continue fueling risk aversion. We need to start seeing some direction in Europe. It is true that progress was achieved in the EU leaders meeting last week, though still the EU leaders have a steep hill to climb before the markets start to improve and investors start putting risk back on the table.
The EURUSD is trading at $1.2287. I could cover any number of pages analysing the euro outlook but: the structural concerns about the peripheral nations remain; the recession is spreading to the core of the eurozone; and the ECB is willing, in monetary terms, to throw the kitchen sink at the issue. All reasons enough for the euro to keep on falling.
Stock to watch: Alcoa (Price $, Price Target $)
Alcoa reported results yesterday. Alcoa Inc., the largest U.S. aluminum producer, reported second-quarter earnings and revenue that beat analysts’ estimates after an increase in orders from the auto and aerospace industries.
Profit excluding charges related to a proposed settlement of Aluminium Bahrain BSC’s bribery lawsuit and other items was 6 cents a share, compared with the 5-cent average of 19 estimates compiled by Bloomberg, Alcoa said yesterday in a statement. Sales fell 9.4 percent to $5.96 billion, exceeding the $5.81 billion average of 11 estimates.
For further information on Alcoa or other stocks and bonds we follow, contact our offices on 25688688. Good day and happy trading!
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