What's Important in the Financial World (12/9/2011) Toyota Earnings, Nokia Smartphone Launch

Europe has cobbled together what appears to be a solution to the sovereign debt crisis. The markets do not believe in its efficacy. Most shares traded down once details were release. But the details were few. The International Monetary Fund will be the conduit for funds lent to it by central banks in the region. A bailout fund that could be as rich as 500 billion euros will be created. The European Central Bank likely will increase loans to the region’s banks. The UK, Sweden, Hungary and the Czechs opted out of the arrangement, which ironically came the same day that Moody’s downgraded three French banks. Those downgrades were hardly support for the safety net plans created by the region’s nations today.

Nokia Smartphone Launch

Nokia (NYSE: NOK) finally will make a new assault on the U.S. smartphone market. Its Lumia 710 will be available here within days. The unpopular Microsoft (NASDAQ: MSFT) Windows 7 OS will power the new Lumina, but Microsoft plans to put all of its massive marketing weight behind the launch. Unfortunately, if early sales are slow, the launch will be considered a failure. The press has proved how quickly it can bury a new tablet PC or smartphone. Reports of slow early sales of the Research In Motion (NASDAQ: RIMM) Playbook showed that.

Toyota Lowers Forecast

Toyota’s (NYSE: TM) travails continue. The largest Japanese car company halved its forecasts for profit in the next year. It blamed the value of the yen, which has damaged earnings of other large Japanese companies such as Sony (NYSE: SNE) as well. Toyota also said a lack of parts from flooded regions of Thailand would hurt production. These production slowdowns come just after the car company recovered from the effects of the March earthquake in Japan. Toyota’s problems do not end there. Its market share in the U.S. has dropped from 18% four years ago to near 12% as resurgent U.S. car companies and South Korean manufacturers improve sales.

Inflation in China

Inflation in China slowed to 4.2% in November. Industrial production slowed as well. This leaves central government authorities in Beijing with a thorny problem. Consumers in the People’s Republic should have more buying power. But manufacturers may stop increases in wages, and they may even idle some workers. That will offset any benefits of a sharp drop in price increases. Industrial production may stay slow as the economies of China’s largest trade partners, including Japan, the U.S., UK and EU region, falter. China can move more liquidity into the market through its banking system. Such a move may be too late if the likely ongoing drop in GDP has accelerated. China may be on its way to the “hard landing” many economists predicted.

Douglas A. McIntyre