They’ve already taken a hit on subprime, now major US banks, including troubled Wachovia, could be facing a similar crunch in the construction-lending market.

Part of Wachovia’s problem — apart from its residential-mortgage woes — is the $23.9 billion in outstanding debt it holds in relation to commercial-property projects at the end of the first quarter, according to The Wall Street Journal.

“Teaser rates of just 1% interest, left almost one-in-ten subprime borrowers unable to meet their monthly mortgage bills,” says Adrian Ash in The Daily Reckoning UK.

At least the traders in the futures market “know” what the Fed will do next. They’re betting on a rate hike – you can tell because the futures markets are starting to discount an interest rate hike by the Federal Reserve in October.

Sweden and Norway’s banking systems, previously untouched by the world global credit crisis, look set to be the latest victims of the credit crunch, reports Britain’s Financial Times.

Sweden’s Riksbank said the global credit crisis increased the sensitivity of banks to other shocks, adding that it had warned that growth in the Baltic states could slow down more suddenly than expected.

Dominic Frisby in Money Week reckons the spread of the global credit crisis will benefit gold and precious metals.

Just as it was during the credit crunch, the biggest beneficiary of the next wave of the financial crisis and the ensuing panic will be gold and precious metals.

The US dollar made a comeback after Federal Reserve chief Ben Bernanke warned that a weaker US currency encouraged inflation and said there would be no more rate cuts for the time being.

The greenback climbed more than 1 cent against the euro, and the price of gold dropped $8 after Bernanke’s remarks.

“All inflationary measures are rising and have been for over a year now,” says Keith Fitz-Gerald in Money Morning, “despite the fact that the Fed has apparently only just recently noticed inflation is rising faster than it would like.”

A severe US recession is less likely following better-than-forecast May data from US manufacturers. This from Bloomberg:

Demand from overseas for U.S.-made products is helping to keep factories running even as spending by American consumers and businesses slows. The improvement signals the U.S. may be able to avoid a deep and protracted economic slowdown as the housing slump worsens and food and fuel prices soar.

Canada’s gross domestic product (GDP) shrank 0.1% in the first quarter (or 0.3% annualized), marking the country’s first decline since the second quarter of 2003.

So, without further ado, let’s jump into the problem with the Euro. Back in May 2007, we wrote a piece entitled “Part 2-So What Should We Worry About“.

Today’s headlines look pretty horrible. House prices have suffered their biggest annual fall since the early 1990s, says the Nationwide.

British house prices fell in May by the most since at least 1991, according to Bloomberg:

The price of an average home dropped 2.5 percent from April to 173,583 pounds ($344,000), Britain’s fourth-biggest mortgage lender said today in a statement. That’s the largest decline since the index started in January 1991. From a year earlier, prices fell 4.4 percent.