Weekly Market Summary

By Raymond Chatlani

Markets kept falling at the beginning of this week as investors anxiously waited for the results of stress tests on European banks due on Friday. A sharp drop in US consumer sentiment and Moody's cut of Ireland's credit rating added to the gloom in stock markets. Also fresh concerns over Hungary's ability to pay its debts and a fall of 1.3 percent in the Dow Jones home construction index contributed to markets' falls.

On Tuesday, Asian stocks rose for the first time in 4 days on optimism that China may relax policy tightening measures which could boost domestic demand in the last quarter of the year. European and US markets went down due to disappointing results from Goldman Sachs and news that housing starts had fallen in June 2010. Later the US market became positive as Apple reported earnings that exceeded expectations.

On Wednesday, Asian indices rallied and tech stocks were a major beneficiary due to Apple's stellar results. Also, domestic asian stocks and commodities were boosted as investors felt that China would relax tightening measures soon. Later on Ben Bernarke, chairman of the Federal Reserve Bank stated that although the US economy is weakening, no new steps were planned to bolster the economy without more signs of a slowdown. Consequently US indices fell and investors shifted money into the safety of US treasury bonds while asian markets slid on Thursday with the exception of China and Singapore.

On Thursday, European and US stocks surged on strong company earnings and some encouraging signs of growth in Europe. Statistics showing that sales of previously occupied homes fell in June and are expected to keep sinking did not derail the market. On Friday, Asian shares were positive and european and US markets are drifting as they wait for the EU banks' stress results.

These past four weeks, markets have been going up and down without any clear direction. Four weeks ago they were negative, three weeks ago positive, last week negative and this week positive. There are still no clear indications as to whether last year's bull market rally will continue or if we will soon face a double dip recession (Think 2008). Neither the bulls nor the bears can gain the upper hand.

At the time of writing, this weekly market summary is complete except for the most important news of the week. Today, the EU will release results of the stress tests that it has done on 91 of the Major banks within the European Union. These results will have a big impact on the market. If the results are perceived as positive, markets will probably rally. If they are analysed as being problematic, then fears of a double dip recession will resurface and possibly fuel fears of a depression. Investor perception of these results will probably drive the markets next week.