Markets Rally After Spain Bank Bailout
Morning Business Memo:
The new lifeline for Spain's troubled banks sparked a relief rally on global financial markets, but the bailout is seen as a temporary fix. Europe has dodged a bullet, and again "avoided financial chaos in a debt crisis that is in its third year," says The New York Times. On Saturday Spain asked finance ministers from the 17 countries that use the euro to rescue its banks, which have been crushed by bad real estate loans. They responded by offering up to $125 billion in credit that the Spanish government could funnel to banks.
Why Europe matters… First, there's the threat of financial chaos if the Euro collapses or the banking system faces further threats. If Europe's banks become insolvent that could lead to another worldwide financial crisis. Second, Europe's recession is a drag on American exporters. This example today from the Boston Globe: "Massachusetts companies that depend on Europe are reporting slower overseas sales as the debt crisis there deepens, raising concerns that it may hamper the state's economic recovery. In the first four months of this year, overseas shipments of Massachusetts-made pharmaceutical products fell about 16 percent and industrial machinery, including computers, dropped about 10 percent, according to the nonprofit World Institute for Strategic Economic Research in Leverett."
The US economy could show signs of slower growth this week. For the first time in a year, retail sales may drop compared to the month before. The numbers come out on Wednesday. Two new reports on consumer confidence will be released this week.
Apple and Microsoft present rival visions of the future. Apple CEO Tim Cook is expected to show off new iPhone software and updated Mac computers today. He kicks off Apple's conference for software developers. The announcement of new software for the iPhone, iPad and iPod Touch has been confirmed by banners that appeared at the Moscone conference center in San Francisco on Friday, reading "iOS 6." Microsoft's TechEd in Orlando will promote Windows 8 - the upcoming dual operating system for PCs.
A boffo box office weekend for Hollywood. Many parents took their kids to see the cuddly critters of "Madagascar 3: Europe's Most Wanted." According to studio estimates, the Dreamworks animated film led the weekend with a $60.4 million debut domestically and $75.5 million internationally, for a worldwide debut of $135.9 million. Ridley Scott's alien saga "Prometheus" follows with $50 million domestically.
Richard Davies Business Correspondent ABC NEWS Radio twitter.com/daviesabc
