Greece just secured enough votes to pass a harsh €13.5 billion austerity package that will attempt to bring down its massive public debt. Greece would not have received the next tranche of bailout aid it needs to stay solvent without approving the austerity package, which was pre-approved by euro area leaders.
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We’ve been commenting lately (in fact, ad nauseam) on the undeniable signs of slowdown in Germany. The euro area’s economic powerhouse has so far been able to resist economic deterioration across Europe, and has been seen as a safe haven as countries like Portugal, Ireland, Italy, Greece, and Spain flounder. Regardless of Germany’s capability to survive and generate growth in the long term, today we received confirmation that Germany has been pulled into the European death spiral:
Update (Nov. 7): German industrial production data came out, and they were considerably worse than expected: output was down 1.8% in September, compared with a Reuters consensus forecast of 0.5%. The EU has also cut its GDP growth forecast for Germany in 2013 to 0.8% from 1.7%, bringing down the whole euro-area forecast to a mere 0.1%. This makes the German manufacturers’ gamble described below even greater.
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Republican presidential candidate Mitt Romney has touted his experience in private equity as an example of how he’ll benefit the corporate world. But would most big businesses win from a Romney victory? Incumbent President Barack Obama isn’t welcome in many board rooms; he talks of higher taxes on the wealthy and more regulation. But will some corporations be on the receiving end of his proposed spending on infrastructure, education and more? Here’s a breakdown of which industries would win or lose the most under each candidate:
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Hurricane Sandy made landfall more or less right over my childhood home in Margate, New Jersey, an island community just a few miles south of Atlantic City. I watched in horror as pictures of flooded streets surfaced and fretted about the damage my parents would find when they returned home. As it happens, their big brick house–on the beach block but ironically one of the highest points on the island—only conceded the ground floor basement, which saw one or two feet of water. Given that this is the first flooding they’ve had since moving in in 1992—not to mention the devastation that took place on other barrier islands in New Jersey, New York, and Rhode Island—we consider ourselves lucky.
Bottom line: Decent jobs report. The economy pumped out 171,000 new jobs in October. (Wall Street eggheads expected 125,000.) The number of jobs produced in prior months were revised higher too. Unemployment ticked up slightly to 7.9%, from the previously reported 7.8% in September. The Twittertariat is pouring over the internals of the report. Here’s some of what they’re finding.
Superstorm Sandy has snarled businesses around the East Coast. Public transportation has been shut down in areas including New York City, and roads have been closed–making it hard for business to get around and for their staffs to get to their offices and shops. As of Wednesday morning, there were still over 6 million customers without power.
US stock markets opened again after their two-day storm-related hiatus in a quiet and apparently smooth manner. In early trading, US shares were flat to higher on relatively modest volume. Over at WSJ.com’s MarketBeat, they’re offering up a tick-by-tick account of the start of equity trading. And no, there was never any water on the floor of the stock exchange.
Wednesday, Oct. 31
News networks inside and outside the US have given an overwhelming amount of attention to Hurricane Sandy, the latest big storm to strike the eastern coast of the United States. Some people elsewhere in the world—particularly in southeast Asia, where such storms are common, and much more deadly—may well wonder what the fuss is about. And they have a point.
The US third-quarter corporate earnings season isn’t even over, and analysts are already downbeat about how companies have performed. Oddly enough, 71% of the 245 companies that had released their quarterly earnings reports by the end of last week reported better-than-expected earnings per share, according to data compiled by Factset. That’s more or less in line with how they generally perform—in the last four quarters an average of 70% of companies have reported earnings higher than expectations.
More than 50% of the populations of Australia, the UK, Sweden, Norway, Saudi Arabia and UAE use smartphones, according to Google. The US, New Zealand, Denmark, Ireland, the Netherlands, Spain and Switzerland have surpassed 40% mobile penetration. The rest of the world is not far behind (perhaps with the exception of my 80-something-year-old grandparents). This has generated big money for Apple and Samsung, which together boast about half of the smartphone market share.
A link from Financial Times
A link from Bloomberg
The European crisis has been characterized by the flow of money from risky peripheral Europe into the continent’s safe havens: primarily, Germany, France, and—most dramatically—Switzerland and Scandinavia. In particular, money has flooded into Scandinavian housing and currency, leading some analysts to worry about a possible asset bubble.
China has driven Apple’s growth in Asia, enough for the company to call it “an extremely exciting market.” Apple CEO Tim Cook gave a few more details about Apple’s success there in a conference call today, according to a Factset transcript:
Apple’s fourth quarter earnings report fell short of expectations, and the company lowered its guidance for next quarter. But one bright spot was in Japan, where Apple’s revenue was up 18% from last quarter and 113% from a year prior.
A link from Bloomberg
Private equity (PE) firms are getting tired of biding their time. For years, they have sat on their hands, waiting for the market to settle and more opportune investments to return. Bain Capital estimated that, at the beginning of 2012, PE shops had $927 billion in “dry powder” (pdf)—liquid funds from investors that had not yet been used—but were still hesitant to go into any deals amid a gloomy economic outlook. With interest rates low and yield in liquid investments increasingly hard to find, PE investors with spare cash have been frustrated watching those assets sit idle at low returns.
Everyone is focused on the impending disaster of America’s “fiscal cliff” at the start of 2013, when automatic spending cuts kick in, tax cuts expire, and politicians have to fight another debate over the government’s debt ceiling. But to add to the turmoil, a raft of new regulations are due to come into force at around the same time—a “regulatory cliff” that is the other aftermath of the financial crisis. More than four years after the fall of Lehman Brothers, regulators are beginning to crack down on banks, law firms, and businesses, demanding that those companies managing consumer debts and deposits adhere to stricter standards.
A link from Wall Street Journal
