What's Important in the Financial World (1/17/2012) Saudi $100 Oil, Zappos Hack

Saudi Arabia apparently has set an oil price target of $100 for this year. That is so high that its effects may overwhelm an economic recovery around the world. Oil and petrochemical prices will move higher, or at least stay at current levels. In the U.S., that could drive gasoline prices back toward $4 a gallon. Most experts believe that $4 gas is high enough to knock out much of the consumer activity that was renewed in the U.S. during the past two quarters. The Saudi oil price target can be added to the EU trouble as another potential risk factor for a recovery in global GDP.

Spain’s Bond Sales

The ratings downgrades of nine European nations and the European Financial Stability Facility did not completely damage Spain’s efforts to raise money in the global capital markets. Spain sold $4.88 billion in 12-year and 18-year paper. That was just below the $5 billion target. The positive news is that the average yield on the 12-month bond was 2.049% compared to 4.05% a month ago. Now, the markets will wait to see if Greece defaults before setting interest rates on sovereign borrowing in the region much higher or lower.

China’s GDP Growth

China’s economic expansion was 8.9% in the final quarter of 2011. That is somewhat lower than in the past two years, but higher than a consensus estimate of 8.7%. Analysts have adopted the theory that the central government will ease access to capital. That could allow China to grow at nearly 9% throughout this year. But monetary policy cannot entirely offset a sharp drop in demand for Chinese exports if Europe goes into a deep recession and the U.S. expansion stalls, perhaps because of Europe. If China’s economy was decoupled from the balance of the world’s a few years ago, it is no longer. Its $6 trillion economy is so large that it needs strong activity outside its borders to keep an expansion pace anywhere near what it has been for the past decade.

Zappos Hacked

Hackers broke into the servers of Zappos, the online shoe store owned by Amazon.com (NASDAQ: AMZN). They exposed 24 million names, addresses and phone numbers, along with the last four digits of credit cards. The action is not only a headache for Zappos and its customers. Amazon.com provides the e-commerce platform for hundreds of companies around the world. Its servers and e-commerce security have to be state of the art. That state is not good enough to keep the most clever hackers out of its system. And that almost certainly means that the Zappos situation will not be an isolated one.

Douglas A. McIntyre