Investors are giving Italy and Spain fits again. Long-term bond yields are rising again, this time Spain’s 10-year topped 6% and Italy is closing in on that number. It seems investors lack confidence in the ability of either country to pull out of its economic downturn, as well as cutting their mountains of debt. Ultimately, higher bond prices means higher payments, which means less money to stimulate their economies. Two things can happen to change this scenario. The first is the ECB can step in to buy bonds and the second is the European economies will start to show some life, as they recently did in the last round of data reporting. More to the point, though, is the most current round of data reporting, which shows something is happening in Europe that could help bring the Eurozone out of its economic slump.
The euro zone’s trade with the rest of the world showed surprising strength in February, driven by French and German exports of cars and machinery, but imports remained weak as European households struggled through the bloc’s economic slump. Exports from the 17 countries sharing the euro surged 11 percent to give a trade surplus of 2.8 billion euros, from a deficit of 2.8 billion euros in February 2011.
Nice turnaround and it points to a potential sea change in European economic affairs. The weakness in the above is the imports number, however. European manufacturers are selling more product outside of the Eurozone, true, but the folks inside aren’t buying product from other countries. Now, let’s look at this more closely. If European manufacturers are creating more products and selling them to China, for example, a country actively looking to import more European goods, it means they are creating more jobs, possibly paying people more, or just giving out more hours of work. It means, the European consumer will have more money to spend, and along with that comes the confidence to spend it. Ain’t no different than right here in the USA. Couple this with China coming in for a soft landing and then add that to US economic momentum continuing and then add that to the surprise strength of Eastern Europe manufacturing and it is a recipe for global economic growth. Now, if the investors in Spanish and Italian bonds could just put this together …
Now, onto a simple but direct question from a reader. Mind you, I don’t advocate any particular market to buy or sell, although sometimes I will mention one as something to look at. Nevertheless, this reader asked my opinion, so I will give it.
What is your opinion on Ebay and Amazon (Amzn)?
I think they are both fine companies in the right sector. They have their issues, but they are not going away. Their market base is loyal and solid and their commercial niche will only become larger as technology advances and the ongoing shift to online shopping keeps moving forward. The only question then is value. Are the stocks priced right, are they a good trade or investment?
That, my friend, is a question for you. Do your homework. Get into the numbers. Check out the ancillary writing about the companies. Try to get the “inside” scoop by researching what learned folks are saying. Learn your two markets, pay attention to how they move. Track the price action, and then make a move, or don’t, depending on what you think you know.
Trade in the day – Invest in your life …
