The following headlines from around the world should make it clear that strength in equities is still to be sold…

French, German and Italian consumer and business confidence is collapsing. UK retails sales dropped the most since 1986 and Spanish unemployment is rising rapidly as their uber bubble in real estate implodes. Most importantly, Japanese exports fell for the first time in four years, absolutely destroying the ridiculous theory that the rest of the world would pick up the slack of a slowing US economy.

The other BIGGER shoe is finally dropping: The REST of the world is weakening rapidly.

French Business Confidence Falls to Lowest Since 2005 (Update1): “French business confidence fell to the lowest in more than three years in July as record oil prices and a stronger euro dimmed the outlook for economic growth.

An index of sentiment among 4,000 manufacturers dropped to 98 from 101 in June, according to Insee, the Paris-based national statistics office. That was the weakest since May 2005. Economists expected a reading of 100, according to the median of 22 estimates in a Bloomberg News survey.

Growth in the French economy is deteriorating as inflation and oil above $120 a barrel squeeze purchasing power and push up production costs just as the stronger euro hurts exports. The jump in consumer prices prompted the European Central Bank to raise interest rates earlier this month and President Jean-Claude Trichet is refusing to abandon his inflation-fighting rhetoric.”

German Confidence Declines as Europe Recession Risks Increase: “German business confidence plunged the most since the Sept. 11 terrorist attacks and European manufacturing and services shrank, increasing the risk of a recession across the euro region.

The Ifo institute's German business confidence index dropped 3.7 points from a month earlier to 97.5 in July. That was more than three times the decline forecast by economists in a Bloomberg News survey and the overall reading was the lowest in three years. Manufacturing and services across the euro area contracted for a second month and in the U.K., retail sales dropped by the most since at least 1986.”

Italian Business Confidence Fell in July to Lowest in 7 Years: “Italian business confidence fell to its lowest in seven years in July as rising oil costs and a stronger euro hurt prospects for economic growth.

The Isae Institute's business confidence index dropped to 83.5 from a revised 86.7 in June the Rome-based research center said today.