Market Snapshot: Far indeed is this from the Way

June 13 (Bloomberg) -- Gold may climb as investors seek to preserve their wealth against the sovereign-debt crisis in Europe and slowing growth in the U.S. and China.

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European Central Bank President Jean-Claude Trichet and German Finance Minister Wolfgang Schaeuble are at odds over investors’ role in the second Greek rescue in 14 months. U.S. retail sales probably fell in May for the first time in 11 months as car buying eased, according to a survey of economists ahead of a June 14 report. A separate report tomorrow may show China’s industrial production slowed.

/... http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aI5.82P1vbRw

China Daily - The next few weeks sees the collision of four significant economic events in the United States. It's not yet clear if this is a looming train wreck or a breakthrough to a new and better economic environment. The developing behavior on the Dow Jones Industrial Average Index hints at a train wreck. Caution is the order of the day.

The first significant event is the well publicized end of the second round of quantitative easing. The Federal Open Market Committee (FOMC) in April was the last real opportunity to announce any change in direction toward a new round of quantitative easing. The FOMC meeting on June 20 is unlikely to announce any new policy.

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The idea that the US might default on its debt is no longer unthinkable... It has long been assumed that since debt was denominated in US dollars that a US government unwilling or unable to pay its bills would encourage an inflationary environment. The idea of default or repudiation of debt was considered unthinkable. World markets shuddered when Mexico defaulted so there is a real danger of a full-scale panic if the US moves into formal default.

The third significant event is the financial problems of European countries. The Greek and Spanish dramas are a sideshow that pale into insignificance when compared with the mountain of debt accumulated by the US. It is important in a European context, but these are debts smaller than that of California. They are minuscule compared with the US problem, but they have provided a useful distraction from the looming US problem.

The fourth significant event is the continuing decline in the US dollar. The weak rally has retreated from $0.76 and the US Dollar Index is on the way to testing support at $0.715. The situation is worse than indicated on the chart because the US Dollar Index measures the dollar against a basket of other mainly European currencies. The US dollar is declining relative to other falling currencies.



/... http://www.chinadaily.com.cn/bizchina/2011-06/13/content_12683878.htm

People's Daily Online - While the U.S. economy no longer lies on the edge of the abyss, bad employment numbers released last week dashed hopes that the recovery would yield any significant progress on the jobs front.

That could bode ill for the reelection bid of U.S. President Barack Obama in 2012, as Americans rate the economy and jobs as their most important issue. While the GOP has yet to find a front-runner with enough stardom to match the president, the troubled economy remains a threat to Obama's chances of winning a second term.

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Apparently, Obama has a limited period of time in which he can benefit if the economy improves. The state of the economy in the summer of 2012-- just before November's election-- will be a major factor in how voters judge the president's performance, said John Fortier, director of the democracy project at the Bipartisan Policy Center, in an interview with Xinhua.

Indeed, just days after the government's announcement that unemployment has risen to 9.1 percent, short and long-term confidence in the U.S. economy are at the lowest levels of the Obama presidency, according to a Rasmussen survey released on Tuesday.

/... http://english.people.com.cn/90001/90777/90852/7408184.html

Osborne is making a speech on Wednesday but it will be at the Mansion House in the City of London. The place will be filled with big wigs, but they will be the grandees of Britain's financial services sector. There is no equivalent of the Mansion House speech for manufacturing.

Does this matter? One school of thought says that it doesn't. Britain, so the argument goes, has a comparative advantage in financial services, so it makes sense to specialise in securities trading, insurance, foreign currency dealing and investment banking. The City is a centre of excellence that creates well-paid jobs in spin-off trades such as corporate law, accountancy and management consultancy. It also pays large amounts that would otherwise be unavailable to the exchequer. Banker bashing is a classic example of cutting off your nose to spite your face.

It has proved mightily difficult for successive governments to challenge this argument, yet unless Osborne is prepared to do so, it is hard to see the coalition achieving the longer-term economic goals it has set itself. Beyond the short-term priority of deficit reduction, these are to build up Britain's productive capacity, to move people off welfare and into work and to ensure that there is no repeat of the financial crisis of 2007-08.

These are all worthy aims. The problem is that the economy has been moving in precisely the opposite direction for at least two decades and perhaps longer. The decline in manufacturing has made the regions relatively poorer compared to London and the south-east. Employment growth has been weak and heavily reliant on publicly-funded jobs. Meanwhile, the City has grown bigger and immensely more powerful politically. A paper published last week by the Centre for Research on Socio-Cultural Change (Cresc) compares the City to a mediaeval Italian city-state – an economy within the economy.

/... http://www.guardian.co.uk/business/2011/jun/13/coalition-revive-regions-manufacturing-financial-services

On a technical basis, the market has broken through significant support and now is on a “sell” signal with a downside price objective of 1160. Next major support is at 1250 on the point and figure chart which corresponds closely to the widely watched 200 Day Moving Average at 1253 and the recent March lows of 1250.

The NASDAQ (NYSE: QQQ) is now negative for the year while the S&P hangs on to a slim gain of 1.1%. YTD.

A break below these levels would open the way for significant declines ahead and so, indeed, it is crunch time for the bulls to see if they can maintain these levels and the uptrend that has been in place now for more than 2 years.

/... http://seekingalpha.com/article/274487-crunch-time-for-u-s-stock-markets