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Understanding European Woes and the Global Financial Crisis
Spain has been the focus of the latest woes in Europe over the past few weeks. And, the key issue surrounding their banks is over lending into a property market that has fallen sharply. So, I thought the chart below best summed up their predicament.
GFC Confidence
In the lead up to the GFC, Spanish confidence was riding high and was directly correlated to retail spending, which is not dissimilar to where the USA was (and currently is).
But, after the property market tanked, so did confidence and with it went the desire to spend. With unemployment in Spain approaching 25% of the workforce, household spending is dropping which perpetuates a cycle of higher unemployment which in turn puts more pressure on the property market and the banks that lent into it
Assessment
The Spanish bank rally fizzled yesterday.
Link: http://money.msn.com/market-news/post.aspx?post=ee6e272d-7247-4e14-b33a-d8e82d337ffa
Not sure where this one will end. How about you?
Conclusion
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Filed under: Investing, Portfolio Management | Tagged: emerging markets, EU, euro, european debt, GFC confidence, Global Financial Crisis |
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On Spain
Yep – The US equity markets sure took a dramatic turn for the worse yesterday, opening nicely higher before quickly losing ground and finishing near session lows.
Early optimism came from an agreement over the weekend to bailout Spain’s banks, but skepticism over the deal’s effectiveness put a quick end to its positive impact on the markets.
Meanwhile, there were no major economic releases on the US docket to influence trading, and Treasuries moved higher.
Dr. David Edward Marcinko MBA
[Publisher-in-Chief]
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The Morning After
US stocks posted strong gains today, easing some of the pain from yesterday’s unexpected Spain indyuced selloff.
Dovish comments from Chicago Fed President Charles Evans rekindled speculation that additional quantitative easing could still be on the table, which helped the equity markets overcome early pressure from news of a Fitch Ratings downgrade of 18 Spanish banks.
US Treasuries moved lower amid the strength in stocks, as a gauge of small business optimism remained near a 14-month high, while a read on import prices fell by the largest amount in two years, but the previous month’s figures were revised upward.
So, no Spanish hangover here.
Dr. David Edward Marcinko MBA
[Publisher-in-Chief]
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