What’s Important in the Financial World (6/21/2012)

Spain’s bond yields rose again as it became clearer that the country cannot survive without a huge financial bailout costing hundreds of billions of dollars. Today’s auction of April 2014 bonds required an average yield of 4.71%. The auction of July 2017 bonds forced a yield of 6.07%. Spain continues to fall more deeply into its second recession in five years, and unemployment remains stubbornly above 25%. Spain will get a bailout, but it will be on very unfavorable terms. Germany has repeatedly said that direct purchase of the sovereign debt of financially weak nations is not an option for dealing with the problems of Spain, Portugal or Italy. Germany also wants extremely close monitoring of any austerity measures put in place in exchange for aid, an action that would take a great deal of control from Spain over its own budgets and adherence to budget parameters.

Oil Prices Tumble

WTI crude prices raced lower, toward $80. That is down from above $108 just four months ago. China’s manufacturing data and an admission by the Federal Reserve of an economic slowdown in the United States, combined with the expanding recession in Europe, contributed to the belief that demand for crude is faltering. New data on the size of stockpiles also hurt oil prices. MarketWatch reports:

A report from the Energy Information Administration showed crude supplies rose by 2.9 million barrels in the week ended June 15. That contrasted with expectations of a decline of 600,000 barrels for the week, according to analysts polled by Platts.

Economists continue to debate whether the sharp drop in energy prices will cushion the effects of a recession.

Galaxy S III vs. the iPhone

People who review smartphone products are giddy over the new Galaxy S III, and the consensus is growing that the product is better than the Apple (NASDAQ: AAPL) iPhone in many ways. According to the Washington Post:

This week, Samsung’s Galaxy S III phone will go on sale in the U.S. The Galaxy line has emerged as a leading competitor to Apple’s iPhone.

If the new Samsung smartphone is wildly successful, and early demand suggests it will be, Apple will be left to launch a remarkably well-featured iPhone 5 that will run well on the relatively new 4G networks promoted heavily by all the U.S. carriers.

Douglas A. McIntyre