Weekly Market Summary

by Raymond Chatlani

On Monday, Asian markets closed mixed shrugging off stronger-than-expected growth in Japan amid fears China will take new steps to cool its economy. The Japanese government said the economy expanded an annualized 3.9 percent in the July-September quarter. European markets fell in the early morning but turned into positive territory in the afternoon on news that Ireland was in talks with its European neighbours over how to deal with its financial troubles and on positive eurozone trade data. US stocks closed mixed following a jump in October retail sales and on fears that Ireland may seek a bailout.

On Tuesday, Asian stockmarkets fell as an interest rate hike in South Korea added to speculation China will also tighten monetary policy to cool inflation. Also, persistent concerns about the euro zone debt crisis kept investors cautious. Major European indexes fell on Irish debt woes with fears that this could spread to Portugal. US stocks slid following new worries about rising inflation in Asia and the possibility Ireland might need a bailout.

On Wednesday, Asian stock markets retreated Wednesday, extending a global sell-off triggered by Europe's simmering debt crisis and expectations China will raise interest rates again to tame inflation. European markets rose on optimism that Ireland's crisis may be resolved. US stocks were flat although core inflation, which excludes food and energy costs, climbed 0.6% from October 2009, the smallest rise on record.

On Thursday, Asian indices rose on soft US inflation and news that China would introduce price controls on food rather than an interest rate hike to control inflation. European stockmarkets rocketed on expectations that Ireland would become the second euro zone country after Greece to receive a bailout to cope with high debts and deficits. US stocks surged on expectations that Ireland will get a giant loan to ease its debt crisis and as US weekly jobless claims data were better than expected.

This morning, Asian markets closed mixed on good US weekly jobless claims data, fears of EU debt problems and news that the Chinese Government told banks they must hold more reserves. EU stocks fell on continued uncertainty as to the Irish debt problem as EU sources said that a financial aid plan to help Ireland cope with its battered banks will be unveiled next week. Wall street fell on China's raising of Bank's reserve ratios and worries that a financial rescue package for Ireland is proving more difficult to agree than expected.

This week markets and commodities fell on the Irish banks debt problems and Chinese inflation problems.

With the Irish problem still unresolved, investors have taken profit after two good months in the markets largely on fears that contaign will spread to Portugal and Spain. China ordered its banks to raise their reserve ratios to control inflation today. The move is aimed at cutting down on lending to avoid speculative bubbles and curb inflation. Inflation in China shot up to a more than two-year high last month. There is also growing expectation China will raise key interest rates soon as part of the inflation fight.

These events have given investors an excuse to take profits. The Irish problem should be resolved next week. The Chinese Government's policies should also help the economy from overheating. Short term we may well see markets continue to go down but over the medium term, we should see the US Dollar continue to slide and emerging markets including commodities appreciate.

The main threat that still remains is if the Irish debt problem remains unresolved as contaign will spread throughout the EU and the Euro could be at risk.