What Matters in the Financial World (9/10/2011) Walmart Deals, Airbus Delays, Italy Bond Auction

Italian bonds yields drop. The Italian two-year note yield slid 53 basis points, after jumping 82 basis points yesterday. The level, a recent low, probably will not hold. Yields were well above 7% yesterday.The yield continued to straddle 7% all day The core problems of the nation are no closer to being resolved than they were a day ago, or week ago. The international capital markets still perceive Italy as a nation in which the government has exercised little control over its expenditures, and one where too many people are employed in the public sector. Politicians in Italy have balked at severe austerity measures. Economists fear that austerity measures eventually taken will turn the country toward recession. There is no reason to expect that yield will drop below 7%, for an extended period, anytime soon.

European Union Forecast Cut. The European Union cut its GDP growth forecast for the 27-nation region. It is a late admission of  economic trouble, but an admission nonetheless. Concerns about the future of the region have been voiced by the IMF, economists and now the governing body of the region itself. The operating arm of the EU, European Commission, said gross domestic product in 2012, adjusted for inflation, would grow just 0.5% — sharply down from its forecast only six months ago of 1.8%. That statement is barely short of saying that a recession has begun or is about to.

Walmart intensifies sales pressure. Walmart (NYSE: WMT) increased the pressure on competitors with an offer to send a list of its Thanksgiving Day sales items to customers who sign up at Walmart.com or the Walmart section of Facebook. The act likelywill trigger similar programs from Target (NYSE: TGT) and mid-tier retailers such as Macy’s (NYSE: M). But Walmart has an advantage in the holiday sales race other than its number of stores. The Walmart site is visited more often than any other retail destination than Amazon.com (NASDAQ: AMZN). The partnership with Facebook takes advantage Walmart’s great presence on the social network. And, as an aside, Walmart’s decision shows just how powerful Facebook has become in the retail sector.

Aircraft manufacturer delays. The history of late product deliveries by the major aircraft manufactures is still intact. EADS said the Airbus A350 wide body would be several months late, which pushes its launch into 2014. The news sounds much like the series of announcements Boeing (NYSE: BA) made over the past five years as it repeatedly delayed the 787 Dreamliner, which only first flew commercially last month.

Gold is off 1.4% at $1,768.

Oil is up 1% to $96.71, near a three-month high.

Douglas A. McIntyre