Sunday, November 14, 2010

Top News Stories From Last Week That Will Likely Continue to Attract Major Headlines This Week

Dr. David Krause, AIM program director encourages his students to follow macro-economic trends and the financial markets. He said, "Last week we had two dominant news stories that will continue into the Monday and Tuesday news cycle - the Irish debt crisis and BHP Billiton's (ticker: BHP) withdrawal of its hostile takeover bid for Canadian giant Potash Corporation (ticker: POT)." 
Dr. Krause said, "As of Sunday night, Ireland was fighting for its political and economic independence with negotiations beginning in Brussels for the ECU to support a bailout of up to £80billion. Investors have been selling Irish sovereign debt in recent weeks and we'll have to watch this week to see if speculation continues to grow that Europe won't intervene - there could be a run on other countries like Greece, Spain and Portugal. The graph below shows the huge rise in Irish yields and its credit default spreads."

Source: Bianco Research

BHP Billiton withdrew its hostile takeover bid for Canada's Potash Corporation on Sunday saying it did not feel it would be successful in convincing Canada's federal government to approve the deal. Officials in Ottawa announced earlier that it would block the deal because it wasn't a net benefit to Canada. Krause said, "I believe that BHP's withdrawal of the Potash deal indicates the beginning of more governmental intervention. Following the G20 meeting in South Korea, I think we likely continue to see governmental intervention in the form of increased tariffs and blocked acquisitions."

Dr. Krause added, "The AIM students need to watch the global economy closely this week. If the European debt crisis worsens, this could negatively impact the demand for risk assets. Last May, the PIIGS scare dragged the market significantly lower - and we might be about to see the next shoe drop if Ireland doesn't receive a backstop this week."

"Ireland is the new Greece"

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