What’s Important in the Financial World (6/11/2012)

The attention of international capital markets is likely to turn to Italy now that Spain has gotten a $125 billion reprieve for its economy and troubled banks. Although Greece remains a concern, Italy is Europe’s third-largest economy, ahead of Spain. Bond vigilantes have to find some pool of sovereign paper if they want to keep up their methods for making profits.

Bloomberg reports that:

Italy has more than 2 trillion euros of debt, more as a share of its economy than any advanced economy after Greece and Japan.

The perception may be unfair. Italy’s economy is much more diverse than those of Spain, Portugal and Greece. Italy has a robust manufacturing sector and continues to be one of the region’s export powers.

India Downgrade

India may be the first BRIC nation to lose its investment grade rating, a blow to both its prestige as a growth economy and perhaps its ability to raise money. S&P shocked may sovereign investors as it produced a report, “Will India Be the First BRIC Fallen Angel?” which said:

[T]he Indian government’s reaction to potentially slower growth and greater vulnerability to economic shocks could largely determine whether the country can maintain an investment-grade rating or become the first “fallen angel” among the BRIC nations (which also comprise Brazil, Russia, and China). The “BBB-” long-term sovereign credit rating on India is currently one notch above speculative grade. “Setbacks or reversals in India’s path toward a more liberal economy could hurt its long-term growth prospects and, therefore, its credit quality,” said Standard & Poor’s credit analyst Joydeep Mukerji.

If India does lose its current rating, S&P could turn its attention to other BRIC nations like Brazil and Russia to see if they share enough in common with India to be reexamined.

Gasoline Prices

Gasoline prices continued to drop along with oil prices. There is some hope that this collapse could help the U.S. economy in the second half as Americans continue to contend with persistently high unemployment and home prices that, for the most part, continue to drop. According to the Lundberg Survey, the average price of regular gasoline fell 15.9 pennies in the past three weeks, which ended June 8, to $3.6243 a gallon. The price nearly reached $4 a quarter ago. A sharp slowdown in the Chinese and European economies have contributed to the drop in oil prices, which has taken Brent from nearly $120 a barrel to less than $100. OPEC still claims to be pumping crude at near-record levels. And tensions over Iran’s weapons programs have cooled.

Android and Samsung

Andy Rubin, one of Google’s (NASDAQ: GOOG) senior engineers, claimed in a tweet that more than 900,000 Android devices are activated each day. He did not mention the source of his comments. Android currently has over 50% of the smartphone OS market in the United States. That puts it well ahead of Apple (NASDAQ: AAPL) and entirely eclipses Microsoft’s (NASDAQ: MSFT) Windows mobile. Android is the preferred operating system of the world largest handset company — Samsung. And Samsung is about to release its new flagship into the U.S. — the Galaxy S III. Preorders for this smartphone are expected to be in the millions. Galaxy III will launch across all four of the largest U.S. carriers — AT&T (NYSE: T), Verizon Wireless, Sprint-Nextel (NYSE: S) and T-Mobile. Android has not been as successful in tablet PC’s, but Samsung’s move into that sector, albeit a modest one, may help.

Douglas A. McIntyre