What's Important in the Financial World (6/25/2012)

Four months ago, it was inconceivable that gasoline prices could dip to near $3 a gallon. Most experts expected high oil prices to guarantee a price of $4 for a gallon of regular on the basis of a national average. Yesterday, the AAA Fuel Gauge put the cost of a gallon of regular at $3.411, down from $3.653 a month ago. For some states the figures are much better. In South Carolina, the price is the lowest in the country — $2.998. And prices have fallen below $3.25 in seven states. With the price of WTI below $80 a barrel, and not likely to rise far, gas prices should continue to drop. The number of miles driven this summer is not expected to increase much this year, so the national average for regular could be down to $3.25 by Labor Day.

Who Will Save Spain?

Spain’s Economy Minister Luis De Guindos has sent a communique to Eurogroup Chairman Jean-Claude Juncker in which he says Spain’s banks will need a massive bailout — as much as 100 billion euros. Many Spanish financial firms have growing problems with their real estate loans, which have defaulted or are likely to as the housing market collapses and 25% unemployment destroys the market of buyers. Most economists think that Spain’s central government will need a bailout itself because the country’s gross domestic product has dropped for two quarters and likely will for several more. The summit of European leaders starts later this week. Spain will be the focus of discussions about the region’s financial problems. And the debate between Germany and most other countries about austerity as the road to balanced national budgets will continue as it has for several months without conclusion. That will increase Spain’s jeopardy even more.

Tough Times for PC Makers

Shares in China-based PC company Lenovo have fallen sharply during the past few weeks. Lenovo is, by some measures, the number two manufacturer of personal computers. It competes globally with Hewlett-Packard (NYSE: HPQ) and Dell (NASDAQ: DELL). All three of their stocks have sold off rapidly because of worry that smartphone and tablet sales will make PCs obsolete among some consumers. The tumble in Lenovo shares signals that the slowdown has reached Asia, which is its primary market. Dell and HP earnings already have shown how significant demand trouble is in the United States. And none of the three companies can count on any sales help from Europe.

Douglas A. McIntyre