Weekly Market Summary

by Raymond Chatlani

On Monday, Asian stocks mostly fell as China on Sunday raised banks' reserve requirements for the fourth time this year while the euro weakened on a broad wave of profit-taking. The move was not a surprise as market players had predicted more tightening after last week's data showed an acceleration in inflation. European stockmarkets fell on talk about Greek restructuring of its debt, including a Greek newspaper report on Monday that the government had asked the International Monetary Fund and European Union to start discussions on a restructuring. A Greek finance ministry source said the report was not true. On bond markets, Portuguese, Spanish and other lower-rated euro zone government debt came under pressure. Moody's cut the long-term bank deposit ratings of Ireland's government-guaranteed banks by two notches to Baa1 following a sovereign downgrade last week, meaning that all the lenders are now classified as junk. European and US markets plummeted after S & P downgraded its credit outlook to negative for the United States, citing a "material risk" that policymakers may not reach agreement on a plan to trim its large budget deficit and mounting concerns over Greece. Gold temporarily hit a new high of $1,497 an ounce before retreating to $1,490 an ounce.

On Tuesday, Asian markets fell after rating agency Standard & Poor's lowered its U.S. credit outlook to negative, prompting a global flight to other assets. European stockmarkets rebounded on bargain hunting after a slump triggered by Standard & Poor's first ever downgrade of its US sovereign debt outlook. U.S. stocks rose as results from Johnson & Johnson and Goldman Sachs Group Inc. helped lift sentiment after the prior day’s rout and as new home construction rose 7.2 percent from February to 549,000 units.

Asian stocks rose on Wednesday, following a rebound on Wall Street and in Europe on upbeat corporate results, and commodity-linked currencies such as the Australian dollar also gained as momentum returned to metals markets. Gold pierced record highs above $1,500 an ounce and silver notched the biggest rise of the young second quarter exceeding $45 an ounce as investors banked on safe-haven bets on worries over inflation and the economy. European and US markets rose sharply on on strong earnings reports by Intel Corp. and other companies.

On Thursday, Asian stockmarkets rose as the U.S. dollar slid to a 2-1/2-year low against a basket of major currencies and as investors scrambled to get in front of upward momentum in higher-yielding assets, particularly in emerging markets. European and US markets were buoyed by upbeat US earnings as Intel Corp beat expectations, Apple's iphone sales helped earnings almost double and General Electric posted an 80 percent surge in first quarter earnings.

Markets were closed for Good Friday.

Last week, global markets rose on good corporate first quarter earnings ignoring worries on Greek, Irish and Portugese debt problems and the problems in the Middle East including the escalating violence in Libya.
The US dollar tanked and commodity prices rose with gold hitting new all time highs and silver hitting new 32 year highs. It seems that investors are selling the US dollar and bonds and are buying stocks and hard assets as replacements to protect themselves from high inflation. While it is hard to predict the short term, we should continue to see this strategy over the medium term as long as the US deficits remain and interest rates continue to be lower than the rate of inflation.