Lower PMI in Europe adds to Greek drama
The Purchasing Managers Index, an index measuring broad economic activity, which was released on Thursday showed the weakest outcome for Europe since May 2009. Reuters reports that both Germany and France are caught up in the downturn. A survey released today, however, shows that German consumer confidence is at 5.7, the same level as at the beginning of May, according to the Associated Press. Germany’s economy grew at 0.5 percent in the first quarter. All of these indicators are plagued by the crisis occurring in Greece and the question of whether or not Greece will remain within the European Union. The Dow closed at 12,558 on Thursday and Asian markets were flat. European markets are up on Friday.
Spain halts trading of Bankia shares
Spain’s market regulator suspended trading of shares in bailed out lender Bankia on Friday while the government and board determine how much more rescue money is needed, according to the Associated Press. Bankia is the combination of several Spanish banks that needed support when the real estate market crashed in recent years. The government intervened earlier this month, effectively nationalizing the banking system. Spain is likely to become the next victim of the eurozone crisis, seeking aid similar to Greece, Ireland and Portugal. Spain’s borrowing costs have risen to very high levels of 6.08 percent. A level of 7 percent would be deemed unsustainable.
Market Makers to lose $100 million on Facebook IPO
The trading glitches on the Nasdaq stock market during Facebook’s debut may cost Wall Street market makers up to $100 million, according to the Wall Street Journal. Two hedge funds, Citadel LLC and Knight Capital Group both had losses between $30 to $35 million while Etrade reportedly lost about $1 million. At the outset, a 20 minute delay period placed orders in limbo and many traders did not know the status of those orders for hours. Individual investors who took losses on positions they were unable to trade are looking to their brokerage firms to make up the losses. Those brokerage firms are seeking compensation from the market makers.
Big European funds are dumping euro assets
Some of Europe’s largest fund managers are dumping euro assets amid speculation over Greece’s exit from the euro, according to the Financial Times. Amundi, Europe’s second largest fund, and Threadneedle Investments, the UK’s largest fund, have both cut their exposure in recent days. Standard Life and Hermes Fund Managers have already reduced their exposure and US based Merk Investments indicates they have sold their last euro as of May 15. Managers feel the European process is dysfunctional.
US Banks have too much cash
Unlike European banks, US banks are awash in deposits as investors feel unsafe investing their money elsewhere, according to the Wall Street Journal. The FDIC indicated that net loans equaled just 70 percent of total deposits in the first quarter, the first time since 1984. Total deposits rose $75 billion in the first quarter to $10.26 trillion, taking that number to a new high. In conjunction with the rise in deposits, bank earnings rose to a 5 year high in the first quarter, according to USAToday.
Thirty year mortgage rates fall to record 3.78 percent
The average US rate for a 30 year fixed mortgage fell to a record low of 3.78 percent for the fourth straight week, according to USAToday. This is the lowest rate since long term mortgages became available in the 1950s. The low rates have had only a modest impact on increasing sales. The 15 year fixed mortgage is now at 3.04 percent. Despite the low rates, many people are having trouble qualifying for loans
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.