Equities in New York and Europe have begun to show signs of distress. While they have not sold off badly and remain actually near the highs of major indexes, a handful of important issues should be enough to give investors cause for concern and pause.
The U.S. debt problem is far from solved, while Congress and the White House were able to work out a limited agreement on the fiscal cliff and avert a budget crisis regarding that endeavor, it remains no small problem that Congress still must tackle U.S. spending and there are no clear-cut agreements in sight for the ‘debt ceiling’. And it must be noted that President Obama does not have as much room for playing power politics against the Republican led House of Representatives with this upcoming debate. The question is if a compromise can be found?
Secondly among concerns is the debt trap that Europe faces due to the problems confronting Greece, Spain, Portugal, and Italy on a daily basis. While the ECB has been able to solidify confidence it remains to be seen if the E.U. and its institutional infrastructure will be able to keep the financial vessel steady on the open waters without cracking open and sinking should one or two bad storms come. At some point ‘talk’ will no longer be a fuel the ship can sail on.
Two additional wildcards exists that should be watched. Chinese economic statistics are starting to being questioned by some experts and said to be possibly misleading. China manufacturing and export numbers have been called into question and like the States and E.U., some analysts are starting to question whether China is trying to play its own version of a confidence game.
Lastly the company Apple has run into a spate of rather sour news recently regarding its inability to meet its sales targets in the smart phone sector, which is seeing demand ebb in many markets as the technology has saturated consumers with a variety of competing brands. Apple has been a main driver in the equity markets the past few years and any trauma caused to its own corporation will have a systematic effect on major indexes which view the Apple share price as a barometer.
While equities have been a bit more nervous , the EUR has extended its winning streak and has maintained its higher values against the USD. Gold is trading around 1680.00 as of this writing and WTI Crude is flirting with higher values. While the GBP has lost a bit of value to the Greenback, the AUD has maintained its higher values as physical resources continue to see some speculative demand. The JPY has gained slightly today, but it remains near the weakest points of its value. But while risk taking is still high, the broad markets have shown signs of being nervous and how this translates into forex, commodities, and equities the next few weeks will be more than interesting.
The U.S. will release Retail Sales data and the Empire State Manufacturing Index today. CPI numbers have already come from Germany early Tuesday and met expectations. Tomorrow the States will also follow-up with CPI statistics and Industrial Production results.