European Debt Crisis Could Impact U.S.

In a meeting on Capitol Hill on Wednesday, Federal Reserve chairman Ben Bernanke reportedly revealed to Republican senators that he is concerned about the unresolved European debt problem, noting that a collapse of European markets would be detrimental to the United States. Despite the so-called ‘fiscal plan’ agreed to by Eurozone members last week, Bernanke is not the only influential figure voicing his concern over the ability of European authorities to put their house in order. Britain is not in agreement with the plan, a key point of which is for Eurozone members to contribute an additional €200 billion to the IMF. A further indication that enthusiasm for the fiscal plan is waning, is the fact that the euro fell to below the $1.30 mark on Wednesday, its lowest point since mid-January this year. The reasons for the rise and fall of the euro are many, and theories and opinions abound, but the fact remains that the national debts of some euro members, most notably Greece and Ireland, have brought the currency to the brink of collapse, and leaders are desperate for a solution.

Although the European debt crisis is far from resolved, US stocks showed a slight improvement on Thursday’s opening bell, buoyed up by encouraging global manufacturing data which revealed that, although the manufacturing sector was still contracting in both the Eurozone and China this month, the pace had slowed down when compared with November’s data. Factors that contributed to Wednesday’s sell-off include anticipated interest rate cuts by the European Central Bank, the less than $1.30 rate of the euro and the stronger dollar which dragged down commodities priced in US dollars.

Thursday brings market-moving economic data, such as initial jobless claims, industrial production and producer prices, which investors will no doubt be watching closely. It is anticipated that initial jobless claims will have increased from 381,000 for the week ending 2 December, to 390,000 for last week. The Producer Price Index from the Bureau of Labor Statistics is expected to have climbed by 0.1 percent, following the previous month’s 0.3 percent drop, while November’s industrial production is expected to rise by 0.2 percent for November. Companies reporting quarterly results include FedEx, Discover and Rite Aid.