What's Important in the Financial World (12/28/2012)

Source: courtesy of Google Inc.

Only a few days remain for the U.S. markets to sell off because of fiscal cliff worries. There are actually just two. Volume will be light because so many traders have gone on vacation. Sometimes, thin volume magnifies fluctuations. The markets are in for a wild ride. The S&P 500 has traded down most of the past five days, with a recovery at the end of the period. Rumors of détente between the White House and congressional Republicans encouraged traders, but the chance for cooperation yesterday turned out not to be true. The president will meet with congressional leaders today. If the meeting ends without a hint of a solution, markets will sell down at a torrid pace. Those investors who have taken time off will be left to do their selling on January 3, when the rush to ditch the markets could increase with the volume created by the rested and tanned crowd.

Apple Loses Suit in China

Apple Inc. (NASDAQ: AAPL) was hit with a copyright penalty in China. The Xinhua news agency reports:

A Beijing court ruled against Apple Inc. in a copyright dispute on Thursday, saying the company must pay a fine for selling unlicensed electronic versions of books online.

The Beijing No. 2 Intermediate People’s Court ordered Apple to pay a total of 1.03 million yuan (165,908 U. S. dollars) to eight Chinese writers and two companies for violating their copyrights.

The plaintiffs said they spotted applications containing unlicensed electronic versions of their books available for download last year, adding that the books were downloaded in great quantity, resulting in large economic losses for their authors, their lawyer said.

France on the Brink

It may not seem like much, but France’s INSEE reported that third-quarter gross domestic product was higher by 0.1%, not the 0.2% preliminary number. GDP contracted in the second quarter. France’s economy continues to hug a flat line. A recession could be triggered by more weakness in the EU nations or a recession in the U.S. brought on by the fiscal cliff. INSEE reports:

In 2012 Q3, French gross domestic product (GDP) in volume terms rose by 0.1%, after a 0.1% decrease over the previous quarter.

Household consumption expenditure recovered (+0.2% after –0.2%) while gross fixed capital formation (GFCF) decreased (–0.3% after +0.4%). Overall, total domestic demand (excluding inventory changes) contributed positively to GDP: 0.2 percentage point after 0.1 percentage point. Imports fell (–0.5% after +1.6%) and exports slightly accelerated (+0.6% after +0.3%). Hence, the foreign trade balance contributed positively to GDP growth: 0.3 percentage point (after –0.4 percentage point). This contribution is offset by changes in inventories contribution: –0.4 percentage point in Q3, after +0.2 point.

Douglas A. McIntyre