For Markets, Europe Is Still an Issue

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Eric Maskin, Noble Prize winner on a second Portugese bailout: "We certainly cannot rule out the possibility that there will have to be a second bailout...I wouldn't regard that as a disaster. I think that's part of what you have to do to keep a union together."

Europe is again interjecting itself into the global stock market, with the Spanish stock market down a little over 1 percent, led by banks like Bankinter, Banco Bilbao, and Banco Santander.

Two issues:

1) Remember, the macro issue — which is still what is animating stocks — is what side of global growth you are on in the three main areas of the world: a) the U.S. (above or below 2 percent); b) China (above or below 8 percent); and c) Europe (mild recession or more severe recession).

Euro-wide employment and manufacturing numbers released yesterday were not favorable to the "mild recession" crowd.

Today, Spain's jobless rate rose for the eighth straight month. Half of all Spaniards under 25 are out of work. The official unemployment rate was 22.9 percent at the end of the fourth quarter of 2011. Think about that: An unemployment rate of 22.9 percent. It's 8.3 percent here.

It's not going to turn around any time soon. Spain's economy will likely contract again in 2012, according to the International Monetary Fund.

2) It's the anniversary of Portugal's bailout, and we are far from resolution. One year ago, Portugal accepted a 78 billion euro ($104 billion) bailout from the European Union and the IMF.

Today, Portugese bond yields are far lower than at the height of the crisis, but it's not at all clear that Portugal will be able to again resume bond sales next year, nor is anyone ruling out a second bailout will be needed.

Indeed, comments like the one above seem to be laying the rhetorical groundwork for an additional bailout. That would not necessarily rock the world, but any indication that the Portugal will need to restructure its debt would. Denials all around. So far.

As for the rest of the world, China's gross domestic product will likely do better than 8 percent. An official with the National Development and Reform Commission said first-quarter GDP for China will likely come in at 8.4 percent. China will officially release its first-quarter GDP estimate on April 13.

And the U.S. will likely post growth between 2 to 2.5 percent — anemic and below the post-war average of 3.4 percent, but still growth.

U.S. equity bulls are hanging their hats on a revival of U.S. retail sales, which have shown notable strength during the warm winter. March same store sales are out Thursday.

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