Weekly Market Summary

by Raymond Chatlani

On Monday, Asian stockmarkets rose as China did not raise interest rates as expected. Analysts believe that the next interest rate raise will commence in 2011. European stocks rose as upbeat U.S. and Chinese data boosted investors' risk appetite, and on hopes that Beijing may not raise interest rates anytime soon. Us stocks started off on a positive note after China refrained from raising its benchmark interest rate but gave up gains in the last hour with the indices ending mixed.

On Tuesday, Asian markets rose supported by optimism that China would shun aggressive measures to curb inflation that could inhibit its strong economic growth or blunt its voracious demand for raw materials. European indices rose on good US retail sales. US stocks rose after the Commerce Department reported that retail sales rose for the fifth straight month in November.

On Wednesday, Asian stocks fell on the Federal Reserve's decision not to increase its quantitive easing program on Tuesday which strengthened the US Dollar and drove riskier assets such as miners and oil to fall back. Sentiment in Asia was further dampaned by the Bank of Japan's Tankan survey for December showing that confidence among big manufacturers fell for the first time in seven quarters. Spanish shares led Europe lower on debt fears as Moody's warned that it may downgrade Spain's debt. US markets fell due to inflationary concerns reflected in the bond market as yields keep rising.

On Thursday, Asian markets fell except for Australia and India on low volume. This is a sign that investors are cutting back on exposure to equities in the region for the rest of the year. European stockmarkets closed flat and mixed although Spanish bond yields were forced higher during an auction of sovereign debt. US stocks rose as it was reported that jobless claims fell slightly and housing starts rose in November. Also, European leaders agreed to change the EU treaty to create a permanent financial safety net which further boosted sentiment.

This morning Asian markets rose after two days of declines although on declining volumes. European stocks fell modestly on another Irish debt downgrade. US stockmarkets fell although the U.S. Congress passed an $858 billion bill extending for two years all Bush-era tax cuts.

Sentiment has been bullish this week on strong economic data in the USA as it was reported that jobless claims fell slightly and housing starts rose in November and on some positive policy announcements in the United States in the past weeks especially the plan announced by the U.S. administration this month to extend all Bush-era tax cuts for two years. December's reduced trading volumes and holidays typically cause whippy price action and make big bets difficult to hold for long, so we may see volatility over the last two weeks of this year.

Emereging markets and commodities have hardly moved this week probably due to low volumes. Let's hope that we have a January rally based on the improving economic news that we have been seeing this month.