Hollingsworth Daily Post

Weekly Market Summary
by Raymond Chatlani

Last Sunday, China announced that it would be more flexible in its currency exchange rate which cheered investors as they now expect the Yuan to start to appreciate. This will boost chinese domestic demand as imports into China would now be cheaper. Consequently, all markets rose significantly at the start of the week. Commodities especially did very well as investors now expect the chinese to import more raw materials and grains.

On Monday US data on existing home sales were weaker than expected. On Tuesday Us data showed that sales of new homes in the world's largest economy had fallen by more than expected to a record low. Consequently, markets went down on Tuesday & Wednesday.

This week in Australia Julia Gillard took over as prime Minister from Kevin Rudd as leader of the Labour party. Investors became more positive on commodities as they felt that the new prime minister would be more flexible in negotiating the new 40% super profits on Australian mining companies. BHP Billiton also suspended its advertising campaign against the mining tax as Gillard confirmed that she would seek consenus. On Thursday the Federal Reserve Bank left interest rates unchanged and confirmed that the US economic recovery is still very fragile.

Thursday and Friday were down days for equities as investors are focusing on the G8 meeting on Friday and the weekend meeting of the G20 over the weekend in Toronto, Canada. World leaders are differing on how to nurture a global recovery. While the US insists that stimulus efforts should continue since the global economy is still fragile, Britain, Germany, france and Japan have all unveiled deficit cutting plans. Hopefully, during their weekend meeting, world leaders may come to a compromise of cutting their costs only in areas that will not affect growth. Investors perception of whether a comprise is reached is key to how markets can be expected to react next week.

All in all, equities and commodities were down. Unless world leaders bridge the gap between their differences as to how to foster growth in their economies during their summit, we may face another bad week