Goldman Sachs Now Sees Deeper 2013 Recession in Europe
Wikimedia CommonsGoldman Sachs Group Inc. (NYSE: GS) has lowered targets and bashing objectives on many things. Today it is Europe, which follows the firm’s somewhat worrisome downgrade of copper expectations, and comes after hammering gold incredibly hard a couple of…
Goldman Sachs Group Inc. (NYSE: GS) has lowered targets and bashing objectives on many things. Today it is Europe, which follows the firm’s somewhat worrisome downgrade of copper expectations, and comes after hammering gold incredibly hard a couple of weeks ago. The Europe downgrade may not seem like much on the surface, but the expected action as a result of the cut is what matters here.
Today’s call against European growth is not just about growth, but it is fall further into recession. This week we have noted how European data is weaker than expected, even from the foundation countries like Germany, teetering on the edge of contraction, and France back in recession.
Gross domestic product for the eurozone is now being taken down to -0.7% from -0.5% for all of 2013. That does not sound like much of a downgrade on the surface, but it is the actions that will result from this matter. Goldman Sachs is now predicting that the European Central Bank will cut its overnight interest rates as soon as May.
If Europe cuts its interest rates, this actually may weaken the euro again against the U.S. dollar, and it would come on the heels of a major Japanese yen devaluation by the Bank of Japan. This sets up a scenario in which the value of the euro could swing up or down by a large margin, based on what Mario Draghi communicates next week.
Goldman Sachs has taken the wrecking ball to many sectors and many categories. The eurozone GDP is probably not the last.
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Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.
