Losing two or three countries from the eurozone is distressing enough on its own; however, the writedowns expected from German and especially French banks may require liquidity injections from the central bank to maintain solvency. Pressure on the equity markets may be mitigated by European Central Bank liquidity; however, the net result is a reduction in relative future spending/GDP growth.
By the end of 2007, the eurozone was the largest trading partner with China, surpassing U.S. In 2007, many Chinese companies not only would quote products in euros, some moved away from pricing in dollars completely.
The European economic slowdown is impacting China enough to continue speculation of monetary easing by China's central bank. On May 5, the central bank lowered financial institutional reserve requirements half a basis point.
While Europeans fret over what shoe will drop next, energy costs in U.S. continue to fall. Oil prices are now at a seven-month low reflecting economic weakness in Europe.On Wednesday, United States oil fund USO (USO) traded under $33, a new low for 2012, as TWI oil finished today at $87.49. Oil companies trading at or near 2012 lows this week include Exxon Mobil (XOM - Get Report), ConocoPhillips (COP - Get Report), Marathon (MRO), BP (BP) and the S&P Energy Select ETF XLE (XLE).