What’s Important in the Financial World (4/26/2012) Nintendo Loss, Gas Price Retreat

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Economic confidence in Europe took a nose dive. The European Commission reported its economic sentiment indicator fell in April to 92.8 from a reading of 94.5 the previous month. MarketWatch says that the consensus estimate was 94.2. The EC survey also showed that the consumer confidence index fell to minus 19.9 from minus 19.1. The news is more confirmation that the economic and financial situation in the region is deteriorating. It comes one day after the UK government announced that it has been in recession. Bond yields on sovereign debt continue to rise because of the concerns. There continues to be worry that the rates Spain, and perhaps Italy, must pay are unsustainable as each country wrestles with budget deficits.

Nintendo’s Loss

Nintendo lost money. It is the first time in recent memory that it has done so. Some of the blame falls on the value of the yen. But, more important, sales of its Wii console and newer 3DS handheld device fell. Reuters reported that:

The operating loss of 37.3 billion yen in the year that ended March 31 compared with a consensus estimate of a 41.4 billion yen loss, based on forecasts by 20 analysts surveyed by Thomson Reuters I/B/E/S.

The real threat to Nintendo’s ongoing profitability comes from rivals Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT), which continue to have sales successes with their respective PS3 and Xbox 360 products. And all three face competition from the migration of games to smartphones, which is a trend none of the three has been able to combat.

Gasoline Prices

Gasoline prices and futures indicate that the price of a gallon of regular, based on the national average, may never reach $4. As a matter of fact, the number may drop back to $3.50. Gas futures recently fell from $3.40 at the start of April to $3.10. The carefully followed AAA Fuel Gauge also demonstrated an ongoing retreat. It showed that yesterday’s price was $3.830, down from $3.840 the day before, $3.891 a week ago and $3.898 a month ago. Prices actually are close to matching the year ago price of $3.869. The threat that gas prices could derail the recovery have started to recede as well. Gasoline use also has dropped dramatically, which should put more downward pressure on prices.

Bernanke on Home Prices

One the heels of bad housing numbers from S&P/Case-Shiller, Federal Reserve chief Ben Bernanke told a news conference that the largest threat to the U.S. economy remains home prices. He said that the problem shows no improvement after four years. While the Fed has upped its predictions for unemployment next year and in 2014, and it expects modestly better GDP growth than it forecast earlier in 2012, its governors do not appear to be sanguine about the housing market. The weight of underwater mortgages continues to snag sales, and increase the odds of high foreclosures.

Douglas A. McIntyre