Merkel and Sarkozy clash

There is a fight going on between Merkel of Germany and Sarkozy of France over whether to allow the ECB to, in essence, print more money like we have done here. Sarkozy would like it to get out of the Euro sovereign debt crisis and Merkel would not like that solution. Here's a picture below of the two of them. Which do you see winning the argument strictly based upon body language.

To read the article which goes with the above picture, click here.

Market comments for Aug. 17th, 2011

Today I have put together a 3 month chart of the S&P 500, which shows we are battling a similar fight between the Bears and Bulls, as we are in the Dow charts. Pretty much all the Indexes have a similar pattern. What is driving our patterns is not a sector problem, specific industry issue or stock issue but rather a phase of US growth that has slowed down enough to give many investors pause as to whether they want to take on more risk right now by buying stocks of less risk by selling them. The chart below shows the S&P and its low support level at 1120 and the upper resistance level at about the 1200 level. We won't break out of this range, either lower or higher, until the news turns one direction or the other. Listening to domestic economic news is not enough. You must also listen to what is happening in Europe with its debt issues as well as China for any glimpses of a major slowdown there too.

This morning the PPI data for July was released and it showed a +0.2% reading compared to a -0.2% reading for June. Expectations were for a +0.1% reading for July.

Core PPI came in at +0.4% for July as compared to a +0.3% reading for June. This makes a rise of 7.7% year over year in Core PPI. That is inflationary. Gold has advanced in premarket and European markets are mixed this morning within a tight range.

Tomorrow Initial Jobless Claims data will be announced at 5:30am PST, along with data on CPI, Existing Home Sales, the Philadelphia Fed data and Leading Indicators. So much to digest here.

The meeting yesterday between Germany's Merkel and France's Sarkozy left many unsatisfied as expectations were high for some major announcement and there was none. They did not embrace the aggressive purchasing of Eurobonds as a solution, nor did they strongly propose the Financial Purchase tax I had spoken about yesterday. Just to show another similarity of chart patterns, the chart below is of Germany's DAX Index. Notice the similarity of the patterns most recently.

And lastly, VP Biden went to China to assure leaders we are good for our debt to them and not to worry about the downgrade of the US from AAA to AA+ rating. Good luck selling that when they are looking for some tangible reassurances. VP Biden is good with the blarney so we shall see.

France and Germany in a spat over Greek debt crisis

First the headlines and news and then my comments. From BLOOMBERG/COM. Sarkozy Opposes IMF Loan to Greece, Widens Rift With Germany. By Helene Fouquet

"March 19 (Bloomberg) -- President Nicolas Sarkozy opposes Germany’s call for an International Monetary Fund loan to Greece, a French government official said, pitting the euro area’s biggest members against one another over a rescue plan.

The official, who declined to be named under government ground rules, said Sarkozy favored a European solution to help Greece and said the monetary union must act to restore investor confidence and shrink Greek borrowing costs.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” Sarkozy said in Paris March 7 after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.”

My Comment:

Seems to me France is correct here. The Euro agreements stated that there were certain obligations to be met when a State with the Euro zone had any financial problems. By having the IMF bail out Greece, rather than EU members, the ground rules will have been violated and that has tremendous implications for the Euro. This conflict of positions between France and Germany over how to solve the Greek crisis, is very important as it pits the 2 largest EU members against eachother. It is no secret that France and Germany have always had a difficult relationship at best since WWII and even before that. This makes this a very serious problem and will give a clue as to where the power of the EU resides. Sparks can fly here quickly and the situation can get out of control without much difficulty. Stay tuned!