What’s Important in the Financial World (2/23/2012) Death of the PC, European Recession

The European Commission forecast a growth rate of 0.5% for the eurozone as recently as late last year. Now, it expects a contraction of 0.3%. That means a second recession in four years. The EC also said that the 27-country European Union would not grow either. Reasons for this problem have been brewing for some time. There are the often-mentioned high unemployment rate in many of the member nations and austerity programs that have taken stimulus money out of sovereign economies. What the EC did not express directly is how much worse this may make the debt crisis, particularly among Italy, Portugal and France.

Japan Under Pressure

Japan may cut it imports of crude from Iran by 20%. The Asian nation is under pressure to honor sanctions set by the EU and U.S. to pressure Iran to halt its nuclear weapons program. Japan now faces low oil supplies in a period in which some of its nuclear capacity is offline. That in turn may increase the prices of gasoline and petrochemical products at a time when Japan is struggling to regain GDP growth.

PC Era Is Over?

Hewlett-Packard (NYSE: HPQ) was the second big tech company, after Dell (NASDAQ: DELL), to herald that the PC era has ended, or least the period of its rapid growth has. After poor earnings from Dell, HP reported even worse ones, at least based on Wall St. consensus forecasts. The two companies are the largest in the world in PC manufacturing. Smartphones and tablet PCs have taken over many of the functions of desktop and laptop computers. Neither of the companies has any market share in those two sectors. Each has begun to produce ultralight PCs, but there is no proof that these products can challenge small wireless devices from Apple (NASDAQ: AAPL) and Samsung.

German Confidence

At least one country in Europe has shown some economic confidence. A measurement of that confidence rose to a seven-month high in Germany. Ifo Institute said its measure of confidence reached 109.6. It is hard to understand what the cause of the optimism is. Germany’s economy has not slipped into recession, but several surveys have shown it is close. And Germany still depends on its EU neighbors as a market for much of its exports. Those neighbors are hardly in a position to be voracious consumers.

Douglas A. McIntyre