Last week showed that the problems in the eurozone aren’t just going to disappear. There are still some very real issues to tackle, and it’s not helping that the rest of the world seems to be stagnating economically. There has been a lot to worry about recently, and the fact that the bulls managed to eke out some gains on Friday is little short of a miracle.
FOMC Minutes and US Economic Data
The Federal Reserve released the minutes from the last FOMC meeting. The initial reaction to the minutes was the assumption that the Fed is just about ready to implement quantitative easing. Concerns about the stagnating US economy were prominent on the minds of many. However, comments later from a Fed member (although a non-voting member) crashed the party. He said that the FOMC minutes were old, and that the situation has already changed.
However, hope was re-kindled with the latest jobless claims report, which showed an increase of 372,000 claims for the week ending August 18. On the docket this week, in terms of political factors, is the GOP Convention, starting today. And let’s not forget Ben Bernanke’s upcoming speech in Jackson Hole on Friday.
In the meantime, the latest reports out of China continue to show that growth is slowing. This isn’t good news for the entire global economy, since China is considered a major player along with the United States.
Also last week, Francois Hollande, the French president, and Angela Merkel, the German Chancellor, met separately with Antonis Samaras, the Prime Minister of Greece. Samaras continues to ask for more time to meet austerity requirements for its bailout. France is in favor of providing more flexibility to Greece, but Germany is not so eager to continue to compromise.
Even though Merkel insists that Germany wants Greece to remain in the eurozone, the Bundestag leader, Volker Kauder has expressed the view that, even though he believes Europe is the future, he wouldn’t be heartbroken to see Greece exit the eurozone.
Talks are fine and good, but nothing is likely to be decided until at least September. And, even though Greece is once again dominating headlines, it’s important not to lose sight of Spain and Italy, which are still battling high bond yields, and waiting to see if the ECB will really announce something helpful.
For now, it looks as though there is a lot of wait and see happening. Keep track of Europe, and remember, too, that there will be plenty of domestic influencers for the markets as the US presidential race heats up.