Weekly Market Summary

Weekly Market Review
Global stock markets fell slightly on Monday on increasing investor concern about slower global economic growth following a week of disappointing macroeconomic data, including evidence of a downbeat US labour market and a slowdown in Chinese manufacturing and the continued fragility of the UK economy.
European equities also declined further with miners lower on a gloomier economic outlook although volumes were thin as Wall Street was closed for the Independence Day holiday. Banks edged down as caution prevailed ahead of the outcome of the stress test on European banks. BP managed to gain ground due to optimism that the plugging of the leaking well in the Gulf of Mexico is now only about a month away and market speculation on its share price. Asian equities were mixed this morning with Japanese exporters falling significantly due to the strengthening yen.
British shares rallied Tuesday as BP extended gains and other commodity-sector firms advanced with the overall index up 2.9%.The index closed down 0.3% on Monday, extending year-to-date losses to nearly 11%.However whilst the American market started well the market ended up flat after a volatile days trading.
Miners were among the strongest advancers after the Reserve Bank of Australia left interest rates on hold. Also helping the advance in London, BP shares rose 3.7% bringing gains made since the start of the week to 7.3% with further speculation that the Libyan and Middle East sovereign wealth funds now see the company as a “ cheap buy “.
British shares closed higher on Wednesday led by gains in BP and J. Sainsbury amid speculation of Middle East interest and helped by strong early gains in the U.S. The FTSE 100 index closed up 1% at 5014.82. BP shares rose again by 4.8%, amid further speculation that the oil giant could gain more investors, possibly from the Middle East. In retail, the supermarket group J. Sainsbury rallied nearly 5% to 344 pence a share on Wednesday as speculation resurfaced that the firm could get a bid from minority shareholder Qatar Investment Authority, British department store retailer Marks & Spencer fell 2.75%, paring gains made since July 1.
The International Monetary Fund (IMF) has raised its forecast for global economic growth this year, from 4% to 4.5%.It said the world economy grew strongly in the first part of this year, mainly due to robust growth in Asia. Developed economies maintained a modest but steady recovery in the same period. But it warned risks had increased and there had been a setback in progress towards financial stability.

Thursdays news and market movement was all about bank and jobs data in the US and Asia. Credit Suisse equity strategists recommending that investors buy into the sector, as the Bank of England left its key rate on hold. Shares of Lloyds Banking Group rose 4.3%, Royal Bank of Scotland climbed 3.6% and shares of Barclays rose 3.6%.Credit Suisse said U.K. banks have clear advantages over European rivals. The firm upgraded the entire European banking sector to market weight from underweight. Finally, the U.K appears to be in a stronger position has had its stress test, has a single regulator and has a government committed to fiscal orthodoxy, thereby limiting sovereign credit risk, they added.
U.S. stocks opened with gains ending the session 1% up with Asian shares also seeing advances, both markets being boosted with better than expected jobs data. Royal Dutch Shell enjoyed a strong session, climbing 3.7% with shares of BP edged up 1.4%.
After a positive overnight in the Asian markets, European and American markets are fairly flat for the end of the business week. With high profile companies losing a little of this weeks gains including BP, Royal Bank of Scotland and Barclays. With the Dow Jones and Nasdaq both showing an upward trend today, all indicies will show a rally for the week.

Overall, the market rally has been due to the trading of stock in companies generally seen as having been oversold in previous weeks and months and now been seen as “cheap stocks” among them being stocks in the energy and global banking sectors.
This temporary rally is set against most economic fundamentals pointing to a continued market weakness in the remainder of 2010 as interest rates remain low, and economic austerity plans continue to be put in place.


Paul Tillbrook