Thursday, November 22, 2012

Euro-zone is in Bloody Trouble; Shattered Stock Markets should be the Norm in 2013

Euro-zone economy is headed for its weakest quarter since early 2009, according to business surveys that showed companies witnessing deteriorating order books (book-to-bill ratio) in November. Banks and Hotels are performing poorly and laying off employees at an accelerating pace; impact on the stock prices should be negative in 2013 as the average consumer's psychology is shattered.

The flash service sector the Purchasing Managers Index (PMI) fell to 45.7 this month, lowest number since July 2009; survey showed on Thursday, failing to meet expectations of economists who thought it would hold at October's anemic 46.0. It has been stuck under 50 for 10 straight months, 50 is the number that divides growth from contraction. 

With more austerity being piped, a reminder of the thorny sovereign debt crisis in this week's failure of lenders to agree more aid for Greece, prospects for next year look dim.

The concern about the outlook is getting worse as the Euro-zone races towards 2013, many economists agree that German companies have become pessimistic about 2013.

PMI had its biggest decline in November month over month since early 2009, when the U.S. was spiraling into the bail-out new abnormal abyss.

There is no positive conviction among businesses that conditions will improve in 2013. Service sector companies are more pessimistic than at any time since 2009, when the expectations index fell to 48.6 and the zone was experiencing its worst post-war recession.

Economists polled by Reuters remain divided over whether the European Central Bank will cut its main refinancing rate from 0.75% to a new record low 0.5 percent or lower.

POTC predicts the Euro-zone stock indexes will be 20%+ lower this time next year as structural fissures are too deep and jagged to fix. Euros need a new technological growth paradigm to emerge overnight or they must move to abolish and dissolve big Govt agency control in favor of lower taxes and less regulatory barriers for private business.

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