Bad news bolsters investors belief that central bank will come to rescue
The Dow jumped 155 points to 12,651 on Thursday due to the belief that the European Central Bank will come in to resolve the European debt crisis and the belief that the Federal Reserve will announce additional economic stimulus efforts. The Wall Street Journal reports that bad labor market news combined with inflation data sparked the speculation regarding the Fed stepping in. The claims for US unemployment increased and the prior week was revised upward. Additionally, overall consumer prices fell in May, but excluding food and energy the consumer prices actually rose 0.2 percent, indicating increasing inflation. In the final hour of trading, the market gained as much as 202 points after Reuters reported that central banks were preparing to provide liquidity to markets if needed after the Greek election. Both Asian and European markets are positive on Friday.
Moody’s Cuts 11 European Banks’ Ratings
CNBC is reporting that Moody’s cut the ratings of 11 European banks and said it will cut again if Greece exits the euro. Five Dutch banks, three French banks and one each from Belgium and Luxembourg were downgraded along with Dutch bank and insurer ING. ABN AMRO was one of the banks downgraded.
Oil rises as OPEC keeps output steady
Oil futures rose on Thursday as OPEC agreed to keep its output unchanged for the second half of the year at 30 million barrels per day, according to Reuters. The move implies a supply cut of 1.6 million barrels per day since Saudi Arabia has been producing an excess supply. OPEC seeks to keep crude at $100 per barrel. OPEC fears that weakening demand may come from Europe should the recession continue.
Germany holds out on jointly issued European guarantees
Germany has found itself isolated from the leaders of Spain, Italy and France, who want the 17 countries in the euro currency to move quickly to bind their governments’ finances and debt, according to the Associated Press. Germany, which is Europe’s largest economy, bears most of the costs of the bailouts and is reluctant to expose itself further. The topic will be one of the major issues discussed at an upcoming G20 meeting next week. Experts indicate that the European interbank lending system is frozen. The upcoming Greek election is also impacting the outcome. Experts indicate that Europe remains at a tipping point. Expect markets to be volatile in the upcoming weeks.
Americans buying cars with smaller engines
The Associated Press indicates that more than half of the new cars sold in the US through May had four cylinder engines, up from 36 percent in 2007. The JD Power and Associates survey indicates that the major reason is that smaller engines offer better acceleration than in the past, and the cost of gasoline makes families buy smaller engines. Small engines also got a boost in 2007 when the government began raising gas mileage minimums, eventually requiring new cars and trucks to average 54.6 mpg by 2025. In March, the average new car fuel consumption hit 24.1 mpg. With a weakening economy, drivers are expected to be driving less.
Stanford gets 110 years for $7 billion swindle
Former jet setting Texan, R. Allen Stanford, was sentence to 110 years in prison for swindling investors out of $7 billion. According to the Associated Press, Stanford used money from investors who bought certificates of deposit from his bank in Antigua to fund a string of failed businesses, to bribe regulators, and live a lavish lifestyle that included yachts, cricket tournaments and private jets. Stanford was at one time considered to be worth $2 billion but most of his assets have been seized and he was forced to rely upon court appointed attorneys. He was found guilty on 13 of 14 fraud related counts in one of the largest Ponzi schemes in US history.
Catherine S. McBreen is President of Millionaire Corner. McBreen plans and develops content for Millionaire Corner. Catherine balances editorial content to meet the informational needs of both new and seasoned investors. She designs special monthly surveys on topical issues affecting the economic environment.
McBreen has a B.S. in speech communications from Northwestern University and a J.D. from DePail University College of Law. She is a member of the American Bar Association, the Illinois Bar Association, and the Chicago Bar Association.
Well-known for her expertise in the affluent and retirement arenas, McBreen is a frequent speaker at industry conferences. She has been quoted widely by the financial media, including The Financial Times, The Wall Street Journal, Research, Private Asset Management, On Wall Street, Reuters, Bloomberg News, The Dow Jones Newswires and Worth. Cathy has appeared as a guest on CNBC Closing Bell, First Business Morning News, Neal Cavuto at Fox Business News, ABC and CBS radio.
McBreen is co-author with Spectrem President George H. Walper, Jr. of the book "Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America's Richest Families" (Portfolio, January 2008)
Catherine is the mother of four and is involved in many school and community events.