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Why Europe Will Feel More Pain From the Oil Market Than the U.S.

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This weekend's jump in oil prices isn't great for anyone, but it will be worse for Europe than for America, for a variety of reasons.

But perhaps most important is that Europe was in far weaker shape than the U.S. even before crude prices jumped over the weekend.

The way to think about it is as follows:

A frail individual who catches a cold is likely to be bedridden for days, whereas someone in prime condition is more likely to be impervious to such a virus.

In this case, the frail character is Europe's mainland economy, notably Germany, France, and Italy. The economies of Germany and Italy are already contracting and France was set to follow soon even before oil prices jumped. Now that process of decline will be accelerated.

On the other hand, the mighty character in prime condition is the U.S. Its a big strong economy with little going wrong, at least compared to what's happening in Europe.

We have multi-decade lows in unemployment and solid growth. Despite all the recession scares the data look pretty good. The virus of rising oil prices will have a dampening effect on consumer spending at the margin. But the total effect likely will be imperceptible within the economic data.

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Constable owns none of the securities listed in this story.

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