Greek government fails to agree on spending cuts
The leaders of the three Greek parties failed to agree on Sunday to a package of spending cuts worth $14.7 billion that are required to appease its Euro zone creditors. USA Today reports that the leaders agreed to meet again on Wednesday but the feeling was that the people could not withstand more cuts. The Greek economy has been in a deep recession for 5 years with its economy shrinking by 20 percent. Unemployment was at 24.4 percent in June. Failure to make the cuts will cause the European Central Bank, International Monetary Fund and the European Commission to withhold $39.7 billion of cash that Greece desperately needs.
China’s factory output weakest in three years
Growth in China’s factory production slowed to a 3 year low in August, suggesting Beijing may need to launch more stimulus efforts. The Associated Press reports that August industrial production in China weakened to 8.9 percent, down from 9.2 percent in July. This is the lowest number since May of 2009. The Chinese government has cut interest rates twice since the start of June but they are moving cautiously because stimulus efforts in 2008 led to inflation and wasteful building.
Stocks close at multi year high
The Dow added 14.64 points on Friday to close at 13,306, its highest finish since December 2007. According to the Wall Street Journal, the market rose despite a poor jobs report that indicated the US economy added only 96,000 jobs in August, short of the expected 125,000. The unemployment rate fell to 8.1 percent down from 8.3 percent, primarily because many of the unemployed have stopped looking for work. Labor force participation fell to 63.5 percent, down from 63.7 percent in August and the lowest since 1981. Both Asian and European markets are mixed on Monday.
US companies predict poor earnings
Despite the fact that the stock market is at a four year high, many US companies are downbeat. According to the Financial Times, S and P 500 reporting companies are three times more likely to predict they will miss analysts' expectations of third quarter earnings than beat them. This is the worst guidance ratio since the last quarter of 2008, when the economic collapse occurred. US companies expect growth to slow due to the global economy. Experts indicate that these readings are generally the same as those found when a recession is occurring.
Euro zone events will impact markets this week
A week of critical events will impact the markets this week, according to Reuters. Last week the European Central Bank, or ECB, pledged to buy as many bonds as needed from Euro zone governments, in order to support the stability of the euro. Markets responded positively to the news. This week, however, the German constitutional court will rule on the legality of the permanent rescue fund that has been created. Additionally, the European Commission will unveil plans for a European banking union, and the Netherlands will hold general elections. The German court decision is critical. If the court rules against the fund, it will have a devastating impact on bond and currency markets. Experts predict the German courts will uphold the legitimacy of the fund but attach multiple strings to its operation.
iPhone owners looking to upgrade
The new iPhone 5 is expected to be unveiled on Wednesday and an unprecedented number of users are anticipated to purchase the new phone. USA Today reports that NextWorth.com, a service that provides quotes for old phones has seen its number of requested quotes increase by 610 percent. Experts indicate that many users did not upgrade their existing model to the 4S model and therefore users are itchy for an upgrade. eBay and Craigslist provide the best prices for used phones. Best Buy and Target will also accept used phones and Apple will provide a gift card for the appraised value of a returned older model. Experts expect this to be the biggest iPhone launch ever.
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.