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Top links: Oil prices likely to fall further

A roundup of what The Globe and Mail's market strategist Scott Barlow is reading this morning on the World Wide Web.

Portugal's Espirito Santo International, holding company for the country's largest bank, has missed payments on a debt issue, sending regional equity markets into a tailspin. The publicly traded bank stock, Banco Espirito Santo SA, was halted after falling more than 20 per cent and the primary Portuguese equity benchmark stands lower by four per cent.

The ripple effects were felt throughout the EU – Spanish bank Banco Popular Español was forced to withdraw a debt issue due to market turmoil.

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The news is a sign that the European financial system remains fragile but recent history suggests that all central banks in Europe will be stepping in to avert any credit market-related contagion, providing ample liquidity to keep the interbank lending market functioning.

"Espirito Santo creditors doubt containment on missed payment" – Bloomberg

"Portuguese rout in one chart" – FastFT (subscription req)

Crude oil futures are on a sustained losing streak approaching 20 days long, but spot prices, while weaker, haven't fallen all that much. Finance blog Sober Look notes that speculative crude buyers indicate a bit of a frenzy and oil prices are likely to fall back, but how far is anyone's guess.

In related news, Reuters reports that Chinese oil imports have declined significantly. The Chinese are notoriously price-sensitive buyers – avoiding high prices and buying on pullbacks no matter what national inventory levels look like.

"Speculative Activity in WTI" – Sober Look

"China June daily crude oil imports down 7.8 pct on month" – Reuters

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London School of Economics professor Carlota Perez has developed a fascinating theory regarding the interplay of technology and developed world economic reform, one with potentially huge implications for the Canadian economy.

In simple terms, Ms. Perez believes the financial crisis heralds a New Golden Age of technological advancement, similar to the industrial revolution, that will increase the standards of living for everyone. The catch is that old economy industries – autos is an excellent example – and financial services have to be de-emphasized to allow the transition to occur.

Ms. Perez and University of Sussex professor Mariana Mazzucatto released a recent paper arguing:

"The challenge today is not to 'fix' finance while leaving the economy sick, but rather to change the way that the real economy works, we then identify the solution: a policy direction that is smart, inclusive and takes advantage of 'green' as the next big technological and market opportunity."

"Innovation as growth policy" – Carlota Perez, Mariana Mazzucato

Tweet of the Day: @levie "In 1995, the average cost per gigabyte was $1,120. Last year it was $.05. 22,000X+ improvement in 2 decades will change a lot of things."

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Diversion: "Meet the couple who could be the first humans to travel to Mars" – Wired

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About the Author
Market Strategist

Scott Barlow is The Globe's in-house market strategist. He is a 20-year veteran of Canadian investment banks, including Merrill Lynch Canada, CIBC Wood Gundy and Macquarie Private Wealth (MPW). He was a highly ranked mutual fund analyst for 10 years and then, most recently, the head of a financial adviser support team at MPW. More


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