Displaying items by tag: europe

(New York)

Have you heard of the new “doom loop”? The term may seem vaguely familiar, and follows in a long line of sensationalist financial terms. Just like in its origin during the European debt crisis, the term once again refers to a European state sinking under the crushing weight of its own debt. You guessed it, Italy. The doom loop refers to the European bank habit of loading up on sovereign bonds, and in turn creating a negative reinforcment cycle where bonds fall in value, which leads to serious concerns over a bank meltdown, which then exacerbate the original economic fears. That is exactly what is now occurring after Italian bonds sold off steeply following the country’s wild budget approval.

FINSUM: Italy is one of the very largest debt markets and economies in the world, and a full scale meltdown there would surely impact global markets, even the Teflon-coated US stock market.

(New York)

US dividend stocks are in a curious, if tenuous, positon at the moment. They have done well recently, but rate rises seem poised to bring prices down. Overseas dividend stocks, however, are not in the same predicament, as the rate environment in many other parts of the world is more benign. Accordingly, here are six overseas dividend stocks to consider: Allianz (4.1%), Hang Lung Properties (5%), Heidelberg Cement (2.8%), Nestle (2.9%), Royal Dutch Shell (5.3%), and Sanofi (4.1%).

FINSUM: Not only are these stocks attractive because of the good yields and mild rate environment, but they mostly have very attractive P/E ratios as well.

(London)

We don’t cover the Brexit saga very much, mostly because it doesn’t seem to have a great deal of relevance to the US. However, interesting news is out today: the UK’s Labour party is trying to get a second Brexit referendum going. The political details are complicated, but the general plan is to derail the government’s current Brexit plan, and then hold a general election that could work as a replacement for the first Brexit result. A Labour party’s spokesman says that it is a “sequenced, structured” strategy.

FINSUM: We have maintained throughout this saga that the UK should not leave the EU. It is still going to have to be heavily involved with the EU for economic and political reasons, and if it leaves it will simply go from a rule-maker to a rule-taker.

(New York)

Citigroup says that the US just crossed a scary economic threshold. The bank’s well-known economic surprise index shows that the US is now at greater risk of negative economic surprises than is Europe, the first time that has occurred in some time. While the economy has been doing well, the trade war and a multitude of other factors, including the Fed, mean the US is more at risk of an economic downturn than Europe.

FINSUM: It is pretty easy to say that a country whose growth is at 4.1% is at risk of a downturn. It would not take much for the US to slow down considering its growth appears to be peaking.

(Istanbul)

A lot of investors are worried that the turmoil in Turkey could spark a global financial crisis. In particular, Turkey’s weak position could spread to European banks, letting the situation balloon from there. However, the reality is that such fears are overblown, according to a credit analyst. Europe’s banks are actually in a strong position and can absorb losses from Turkey, so there does not seem to be any contagion to spread. Turkey’s problems are largely self-inflicted and unique as well, so it is hard to see all EMs succumbing to the panic.

FINSUM: From an American investor’s standpoint, the Turkey situation should not be very concerning as it does not seem to have much direct relationship to the US economy or markets. Hence our shares rising while Europe’s are falling.