Weekly Market Summary

by Raymond Chatlani


Federal Reserve Chairman Ben Bernanke said lastFriday that the central bank was ready to step in if the U.S. economy showed further signs of weakening. Bernanke's comments sparked a stock market rally, with the Dow Jones industrial average jumping 1.7 percent Friday.
All major Asia stock markets followed the U.S. lead and rose Monday. They also got a boost from Japan's central bank deciding at an emergency board meeting to further ease monetary policy by extending more cheap loans to financial institutions. With UK markets closed, European bourses slid on worries over the outlook for the global economy. Wall street fell amid pessimism about the US economy as a report showed that personal incomes rose less than expected in July.
On Tuesday, Asian markets followed Japan's Nikkei 225 which fell on sentiment of a stronger Yen which erodes the earnings of Japanese exporters. This was caused by disappointment on Monday over the Japanese Central Bank's decision to ease monetary policy by expanding a low-interest low programme. Markets had been hoping for stronger action. European stocks closed mixed as investors fretted about lingering worries over the health of the U.S. economy ahead of key macroeconomic data. US indices closed flat and Latin American markets rose on a surprise jump in consumer confidence in the USA.

On Wednesday, Asian indices rose due to optimism on China's growth as China's official purchasing managers' index rose to 51.7 in August from a 17-month low of 51.2 in July, while Australia's economy grew a stronger-than-expected 1.2 percent in the second quarter. European markets were well up as Asia's data alleviated worries about a global economic slowdown and on signs of stronger US manufacturing data. US markets rose as investors reacted very positively to the improvement in manufacturing data in both China and the USA.

On Thursday, Asian markets strengthened as investors increased their risk appetite as they felt that the global economy is not slowing as quickly as feared. European indices closed mixed as the Bank of England and the EU Central Bank kept base rates at 0.5% and 1% respectively. US stocks rose after the National Association of Realtors said Thursday that the number of buyers who signed contracts to purchase homes rose 5.2 percent in July after hitting a record low in June.

On Friday, Asian stocks squeezed higher but gains were tentative ahead of important US jobs data which would be reported later in the day. US unemployment jumped to 9.6 percent in August, the Labor Department said on Friday, showing the recovering economy is still struggling to create jobs. The department said the economy lost 54,000 jobs last month, a better figure than the 120,000 loss expected by economists. Both European and US markets were up.

This was a positive week for equities and commodities with the exception of the price of crude oil which remained neutral. This was due to improving data on manufacturing in the USA and China and an unexpected rise in sales of previously owned homes and a pick up in factory orders in the USA and that US unemployment fell less than expected. Investors sentiment is changing towards the acceptance that there is less chance of a double dip as data is not as bad as feared.

Data this week shows that the global economy is still growing but at a slower pace. The chances of a double dip recession have lessened considerably based on economic statistics that were reported this week. It looks like the markets will continue going up and down throughout the rest of the summer.