European markets are weak today awaiting the announcement of the bank stress tests, according to the Associated Press. Adding to the fears over the European debt crisis is the failure of the U.S. to deal with its own debt crisis.
Italy passes austerity measure
Italy is set to approve a $99 billion austerity package despite fears that Italy would suffer a crisis similar to that seen in Greece, Portugal and Ireland. The Associated Press reported that Prime Minister Berlusconi moved the measures quickly through the Italian legislature this week, yet critics are demanding his resignation.
S&P threatens to downgrade U.S. debt
Failure of the U.S. Congress to reach a compromise on the U.S. debt and to raise the debt ceiling caused Standard & Poor's to issue a statement that there is a 50% chance it will lower the U.S. debt ratings in the next three months. According to the Associated Press, this is the second ratings agency this week to indicate it is projecting a debt downgrade. Moody's issued its warning earlier in the week.
Markets fell Thursday due to Bernanke's QE3 retraction
After comments on Wednesday by Fed Chairman Ben Bernanke that hinted a new government bond-buying scenario (QE3) was possible, markets rallied. This rally was short-lived after Bernanke retracted those comments on Thursday, according to the Wall Street Journal. Markets fell 54 points to close as 12, 437. This fall was despite other relatively positive news including a rise in U.S. retail sales in June and a drop in jobless claims of 22,000.
Mortgage rates reaching lows
Mortgage rates are reaching the lowest levels in recent years, according to USA Today. The rates for a 15 year fixed are at 3.65%, not including points, which is the lowest level this year. Despite the low rates, the housing market is not rebounding due to the stringent credit requirements being applied by banks.
Sugar crops not so sweet
Brazil is anticipating a poor sugar harvest, according to the Financial Times. Harvests were originally predicted at a low of 34.6 million tonnes but that number has been reduced by 3.3% to 32.4 million tonnes. It is anticipated that sugar prices may exceed the 30 year peak reached in February of this year of 36 cents. The poor weather in Brazil was part of the problem but the recession also factored into the decline due to the cost of refining the sugar. Thus many refineries were dormant. Additionally, an increasing amount of the sugar crop is being used for ethanol, which is cheaper for farmers to produce because it does not have to be refined. Ethanol currently accounts for 55% of the sugar crop. That number is anticipated to increase to 69% in the near future. Sugar prices impact the poorest economies the most, increasing the cost of food and keeping the world financial crisis alive.