Weekly Market Summary

by Raymond Chatlani

On Monday, Asian stocks weakened on renewed worries over the global economy and concern that protracted wrangling in the euro zone could delay a solution to Greece's debt crisis. European markets rebounded modestly as investors sought out bargains and reacted to takeover and jobs speculation after sharp losses before the weekend. US stockmarkets closed flat on corporate deals and the latest downgrade on Greek debt. The Greek government's efforts to pull its economy out of crisis have been dealt a massive blow as its debt rating has been slashed to CCC now only two notches away from Standard & Poor's (S&P) benchmark default rating.

On Tuesday, Asian stockmarkets all rose as Chinese inflation figures and industrial output provided some relief that the world's second biggest economy would not have to aggressively increase monetary tightening, boosting appetite for risky assets. European and US markets rose, boosted by positive Chinese data. Also US May producer prices rose as anticipated and retail sales showed a milder-than-expected decline.

On Wednesday, Asian stockmarkets initially rose as positive data from the world's two largest economies encouraged investors to buy back into growth-sensitive assets, but closed mixed on concern about the global outlook and the Greek debt crisis after EU ministers failed to seal a deal on Greece, prompting a move away from riskier assets which helped gold extend gains. European indexes fell on renewed concerns over Greece's debt crisis and contagion fears. US markets fell on worries the Greece debt crisis may escalate and after a negative reading on New York State manufacturing underscoring the headwinds facing the economy. The New York Federal Reserve's Empire State manufacturing index, an early indicator of U.S. factory conditions, unexpectedly contracted in June, falling below zero for the first time since November.

On Thursday, Asian stockmarkets got hammered as Greek debt troubles deepened as Euro zone officials said a new three-year financing program for Greece may be delayed until next month due to differences over how to involve private investors and also on fears of a US slowdown on poor economic data. European indices fell sharply as worries about Greek's debt troubles worsened and investors feared contagion, reflected in Spain's debt auction. Us markets rose as fewer Americans applied for unemployment benefits last week, though applications remained above levels consistent with a healthy economy and housing starts and permits for future construction rose in May, signs that offered some hope the economy could soon pull out of its soft patch.

On Friday, Asian stockmarkets fell despite positive economic data out of the U.S., as a political shake-up in Greece added to worries that the country might be forced to default on its debt. European markets slipped with markets still largely unconvinced that Greece can dodge a default without political stability in Athens, keeping equity and commodity prices in a near-term downtrend but reversed and closed in positive territory when investors were reassured by a Franco-German summit on the Greek debt crisis. US indices rose after French President Nicolas Sarkozy hinted at a deal to resolve the Greek debt crisis that has hampered equities and worried investors over a possible credit dry-up.

This morning, Asian stocks flipped back into the red after Euro zone finance ministers at the weekend postponed a final decision on extending a further $17 billion in emergency loans to Greece, ratcheting up pressure on Athens to first impose harsh austerity measures. Greece will get the next euro12 billion of its existing euro110 billion bailout package in early July, but only if it manages to pass euro28 billion in new spending cuts and economic reforms by the end of the month, said Jean-Claude Juncker, the prime minister of Luxembourg who also chairs the regular meetings of the 17 eurozone finance ministers.

World stocks fell for a seventh straight week over concerns over slowdowns in the United States and China and the euro zone debt problems. In the USA, retail sales are down, jobless claims are up, and housing has flatlined. In China, inflation is still higher than the Chinese Central Bank's target of 4 percent per annum and investors fear that interest rates will have to continue to increase although Chinese May 2011 inflation figures and industrial output provided some relief that the world's second biggest economy may not have to aggressively increase monetary tightening. The Greek debt crisis could spread to other EU nations such as Ireland, Portugal, Spain and Italy.
A slew of data showing the United States is on the verge of a slowdown has already done its damage to the market. After the heavy selling of the past several weeks, it seems investors are taking a wait-and-see approach -- for now. On Wednesday, Bernanke is to give his views on the economy and any hint that bond repurchase programme will continue may help markets to rebound