European Union

The Eurozone Hangs On By a Whisker

Four days after the Italian elections, only one thing is really clear: A majority of Italian voters have rejected austerity.
The problem is, their victory came up short by the slimmest of margins.
0.36%.
That's the difference between a firm new government that could move Italy out of the Eurozone and the constitutional logjam Italian voters woke up to the next day.
Here’s why that's likely bad news for us all...

French Internet Tax Should Have U.S. Web Giants Very Worried

A proposed French Internet tax is just the latest sign of an increasing desire among the major European Union economies to do more to force the big U.S. tech companies to pay their "fair share" of taxes.

The French Internet tax, an option proposed in a 150-page report released last week, would attempt to tax the collection of personal data. It's directed at such U.S. tech titans as Google Inc. (Nasdaq: GOOG), Amazon.com Inc. (Nasdaq: AMZN), Facebook Inc. (NYSE: FB) and Apple Inc. (Nasdaq: AAPL).

All four companies collect massive amounts of personal data. Google collects information via its free search engine; Facebook, through the activities of users on its social network. Amazon and Apple collect credit card data and customer habits via their retail operations.

"We want to work to ensure that Europe is not a tax haven for a certain number of Internet giants," France's digital economy minister, Fleur Pellerin, told reporters in Paris last Friday.

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Stock Market Today: Europe Waits as Housing Rebounds

The stock market today (Wednesday) climbed slightly this morning as investors waited on the much anticipated European Union summit to begin.

The two-day meeting, which involves the leaders of all 27 EU nations, starts Thursday and many are hoping for signs of deeper integration and building blocks for a new foundation of EU policies.

"What is at stake is not only the economic integration, it is also the overall economic confidence in the euro area, and indeed, our commitment to the European project," said European Commission President Jose Barroso, in a speech Tuesday. "This is why we need to be bold and define the way forward."

After Cyprus became the fifth country to seek a bailout following Greece, Ireland, Portugal and Spain, investors have become more and more pessimistic as to what can be accomplished at the summit. German Chancellor Angela Merkel stiffly opposed the idea of common Eurozone bonds proposed by Italian Prime Minister Mario Monti and preferred by Spain and France as well.

At a meeting of lawmakers from her Free Democratic coalition partners in Berlin on Tuesday, Merkel made her opinion clear.

"I don't see total debt liability as long as I live," said Merkel, a day after calling the idea of euro bonds "economically wrong and counterproductive," according to people who attended the closed-door session.

As investors awaited the summit, economic reports on durable goods orders and pending home sales spurred the markets forward today.

Orders for durable goods climbed 1.1%, the first rise in three months and far ahead of economists' expectations of a 0.5% increase. Pending home sales matched a two-year high.

The National Association of Realtors said on Wednesday its Pending Home Sales Index, based on contracts signed last month, rose 5.9% to 101.1. The index level matched the two-year high reached in March, while the gain was the largest since October 2011.

These reports could keep the momentum going for a housing recovery, following positive home prices and new home sales reports earlier this week.

Beyond Europe and housing, here are some companies making headlines in the stock market today.

Facebook (Nasdaq: FB) stock can now receive opinions and analysis for the first time since its IPO from the 33 underwriters who handled the offering, as the "quiet period" ends today. This period is a 40-day timeframe following an IPO that prohibits the firms involved to publish recommendations.

So far there are mixed reports from many of the larger firms.

Goldman Sachs (NYSE: GS) initiated its coverage with a "Buy" rating and a $42 price target for the next twelve months, Royal Bank of Canada (NYSE: RY) offered an "Overweight" rating and a $40 price target, and Morgan Stanley (NYSE: MS) also offered an "Overweight" rating and a $38 target equal to the IPO price.

On the less positive side were Bank of America (NYSE: BAC) and Citigroup (NYSE: C), who both offered a "Neutral" weighting and price targets of $38 and $35, respectively.

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The Eurozone Crisis is Far From Over

The Greek election last weekend has brought us a brief reprieve. The nation and the Eurozone have stepped back from the brink.

But the larger truth is that little has changed.

Yes, the Eurozone has survived its latest test, yet there is little indication where it will go from here. Considerable continental support for the common currency remains, and EU officials will soon introduce initiatives to consolidate banking and financial policy in the European Union.

Still, the problems keep mounting, and there is very little resolve to fix them.

At this point, a lot of actions (or lack of actions) could still upset the entire apple cart.



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Stock Market Today: This Bank Stock Faces More Backlash

The Greek elections did not generate any significant movement in the stock market today, which is especially bad news for one particular bank stock that's taking a lot of heat from investors.

Greece decided not to leave the euro Sunday as the pro-bailout New Democracy party narrowly won elections tallying just over 30% of the vote. Investors had feared a win by an anti-austerity movement could lead to a breakup of the euro and possibly the European Union.

That's all good news except stock markets opened lower Monday following the announcement.

Maybe investors really wanted the worst to happen concerning Greece, insuring more action by the Federal Reserve when they meet later this week. QE3 is still a possibility but it seems that some are disappointed by the Greek elections, which could just be a postponement to Greece's eventual "Grexit" from the euro.

European markets rallied following the election results, but by the time U.S. markets opened investor sentiment had become neutral. It seems that until the Fed's meeting concludes on Wednesday investors will be stuck waiting for more news out of Europe to guide them.

One sector that has been vilified recently is financial stocks, and today's headliner is Morgan Stanley (NYSE: MS).

The Wall Street Journal this morning highlighted Morgan Stanley for its leading role in Facebook's IPO debacle.

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The Fate of the Eurozone Hangs on Sunday's French Elections

It now looks as though Nicolas Sarkozy's days are numbered. In the balance lies the fate of the Eurozone itself.

It appears Socialist Francois Hollande will win the French election runoff on Sunday and that June's legislative elections will give the Socialists a powerful position in France's parliament.

Added to these developments is the good chance that both the major existing parties in Greece's parliament, which had jointly agreed to the bailout deal, will be voted out of office on Sunday as well and replaced by a motley set of far-lefties.

So while the Eurozone has been quiet this week, the calm is deceptive with the elections on Sunday.

Meanwhile, most of the worry in the Eurozone centers on Spain - which is quite foolish.

Spain recently elected a center-right government with a large majority, which is clearing up the mess left by its predecessors. The country does have a 25% unemployment rate, but that's a function of Spanish labor law and excessive welfare payments, both of which the current government is addressing.

Spain's budget deficit is also smaller than France's, as is its debt level. In fact, Spain's debt and deficit burdens are lower than both Britain and the United States. Spain is not the issue.

Considerable Danger in the Eurozone

As for Greece, it is a shambles.

The truth is it should have been chucked out of the Eurozone two years ago, when it was first revealed that its governments had been consistently lying about its budget numbers.

Had that happened, the new drachma would have sunk to about a third of its former value, and Greek living standards would have reduced by half, all without anything but market forces to be blamed.

Now hundreds of billions of euros have been poured into the country, and its ungrateful electorate is determined to elect every nut-job it can rake up. The whole Greek rescue project has been a complete waste of time and money, and should be ended forthwith.

Fortunately, throwing Greece out of the Eurozone will not destroy the euro - after all, nobody was relying on the strength of the Greek economy in their calculations of the euro's value.

However, France is a different matter entirely.

Unlike Greece, if France gets into serious trouble, the remaining "solid" euro economies led by Germany are not big enough to save it.

And, led by Hollande, France looks to be in considerable danger.

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Debt Crisis Rattles Irish Government as EU Scrambles to Prevent Contagion From Spreading

Ireland's debt crisis has destabilized its government and is fueling speculation that the $118 billion (85 billion euros) bailout may not be enough to keep it from spreading to other Eurozone countries including Portugal, Spain and Italy.

Nervous financial markets yesterday (Tuesday) continued to suggest global investors lack confidence that some governments will be able to manage their debt and cast doubt on the European Union's (EU) ability to contain the crisis.

London Timesthe bond markets are comparable to ''hearse chasers'' who would soon ''take Portugal and Spain to task.''

EU leaders tried to calm the markets and issued assuring statements that Ireland's bailout will halt contagion in the euro region, but investors focused on Portugal, which hasn't cut government spending and for years has been mired in sluggish economic growth.

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