It’s not every day that Heinz, the famous maker of ketchup and other well-known international food products, takes the focus away from other business and economic news, but that is exactly what happened yesterday. It was as if Europe served up a bad hotdog, but was able to hide the poor taste with some of Heinz’s product line. It was announced yesterday that Warren Buffet’s Berkshire Hathaway company has invested a huge sum of money in Heinz yesterday along with other partners. While this was going on in the United States and the equity markets via Wall Street traded with some stability because of M&A news, including an airline deal also, Europe essentially tried to make-believe the day didn’t happen. Only one week ago Mario Draghi took the podium for the ECB and said that Europe’s economy was showing signs of improvement, while he didn’t say the continent was achieving growth, he didn’t say that a deterioration of conditions was continuing. He did say that he believed Europe would be able to show real growth sometime by the summer. President Draghi may be wishing he hadn’t said such things now.
Perhaps Europe is hoping for an American savior in the form of massive optimism building among investors which will take the major stock indexes worldwide higher. Maybe they are counting on some rich benefactors to grant them a free trillion dollars to overcome their debt burdens. The GDP of Germany, France, and Italy all continued to fall per yesterday’s reports. The EUR was taken slightly lower but as of this morning is back to its 24 hour starting point. Officials within Europe continue to let it be known that they do not want to cut the main interest rate too. Like a bad script Europe continues to deny the plight that they are in. Spain continues to refuse to ask for bailout money seemingly content to wish upon a star as its economy continues to be in a depression mode. Cyprus is lining up to take a bailout but it does have an election coming, and the Italian saga is far from done. Plain and simple the EUR has fostered good value throughout the summer, fall, and winter on the backbone of a well-played psychological game of confidence. Officials from the ECB and European politicians continue to say all is well, so it must be true. Investors at some point may begin to rattle the Sovereign Debt of Europe again, but for now yields are amazingly calm. The ketchup is just that good.
The U.S. will publish plenty of data today including the Preliminary Consumer Sentiment reading from the University of Michigan, the Empire State Manufacturing Index, and Industrial Production numbers. Wall Street turned in stable trading yesterday among the indexes as the Dow moved slightly lower, but the S&P and NASDAQ held their ground. Gold as of this morning is near 1633.00 USD and is continuing to test its lows. Crude Oil has remained however near its highs.
Talk about a ‘currency war’ continues to filter through the media. Japan which has sought to weaken the JPY the past couple of months did see a negative GDP report yesterday as well. The GBP has continued to also lose some of its value against the USD. The AUD has put in a relatively calm performance and kept its value. What traders should expect is volatility in forex to continue. Question marks abound and policy is being talked about by all of the central banks without a cohesive agreement regarding the manner in which a global recession can be best averted. Domestic agendas seem to be much more important than an international outlook and if this continues negative growth will continue for many. There is just not enough mustard to hide all the problems.