What’s Important in the Financial World (7/18/2012)

A Goldman Sachs (NYSE: GS) report predicts a strong possibility the Federal Reserve will ease monetary policy by September. The most probable reason is that the economy will show evidence of a rapid slowdown or that GDP growth may flatten or even fall. “While we think that a modest easing step is a strong possibility at the August or September meeting, we suspect that a large move is more likely to come after the election or in early 2013, barring rapid further deterioration in the already-cautious near term Fed economic outlook,” Goldman Sachs economist Andrew Tilton said in the report. Fed chief Ben Bernanke already has warned Congress and the Administration that the national deficit and lack of plans to jump-start the economy completely overshadow anything the central bank can do. If that is so, easing will not help the economy over the course of the next year.

Dell CEO Bullish on China

Michael Dell, CEO and founder of one of the world’s largest PC companies, expects that Chinese market will remain hot, according to quotes attributed to him by Reuters. “We are bullish on markets like China, India, Brazil,” the chief executive of Dell (NASDAQ: DELL) said. His optimism about emerging markets may be misplaced. Ample evidence suggests that traditional growth rates in these countries has slowed, and slowed considerably. At the same time, more consumers have turned to smartphones and tablets for computing needs. Growth challenges and new technology have battered Dell, which has been unable to lift earnings partly because it has no smartphone products. Emerging markets, which do not have the promise that they did before the recession, will not cure the lack of Dell products.

Oil Prices Decline

Oil prices fell from a nearly two-month high. WTI prices for August delivery were down to $88.55, which is well below the $100 plus range of five months ago. The trigger for the drop was twofold. First, senior China officials have publicly expressed worry about job and economic growth. The chorus of the comments has become louder over the past several weeks as GDP and PMI figures have wobbled. Just as large a factor is the sharp drop in gross domestic product among Europe’s most financially weak nations, and signs of slowing in both France and Germany. Gasoline inventories have fallen in the U.S. According to the API, inventory dropped 116,000 barrels last week. Oil inventories also slipped slightly.

Douglas A. McIntyre