Weekly Market Summary

by Raymond Chatlani

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. European stockmarkets fell as the postponement of a final decision on extending £10.6billion (€12bn) in emergency loans to Greece spooked investors across the world. Wall Street rose as the latest development to reduce Greece's debt helped draw buyers and the S&P 500 touched a key support level, but anemic volume signalled the recent weakness may not be over.

On Tuesday, Asian stockmarkets all rose except for China as Chinese banks faltered on fears of further tightening by the Chinese Central Bank. European indices rose at their fastest pace in two months, bouncing from three-month closing lows on optimism that Greece will get the financial support to avoid defaulting next month. US markets for a fourth day straight on hopes that a vote of confidence in the Greek government will help the country avoid a default.

On Wednesday, Asian stockmarkets jumped after Greece's embattled prime minister won a confidence vote, taking him one step closer to pushing through austerity measures and avoiding a default, although in Shanghai, concerns over a widely expected interest rate hike tempered gains, with the bourse adding just 0.03 percent. European markets were down modestly as Greek Prime Minister George Papandreou attempted to introduce further cuts to the budget in order for the country to receive its latest 12 billion euro bailout. US indices dropped after the Federal Reserve acknowledged the sluggish pace of the U.S. economic recovery without hinting at further plans for stimulus.

On Thursday, Asian stockmarkets fell with investors reluctant to buy riskier assets ahead of a European leaders meeting which could be dominated by talk of Greece's debt crisis, and after the Federal Reserve cut its growth forecasts for this year and next. European shares fell to a fresh three-month closing low, as higher-than-expected weekly U.S. jobless claims intensified doubts about the strength of the recovery in the world's biggest economy. Greece's debt crisis also hurt sentiment. U.S. stocks closed way off session lows on Thursday on news Greece agreed to a five-year austerity plan, but lingering economic uncertainty ultimately drove the S&P 500 lower, keeping a downward trend in place. Greece won the consent of a team of European Union and International Monetary Fund inspectors for its new five-year austerity plan after committing to an additional round of tax increases and spending cuts

On Friday, Asian stockmarkets rocketed higher as Greece's deal with international lenders for a new austerity plan offered investors a rare piece of good news in a week filled with gloomy economic data.

The Greek government survived the confidence vote allowing the markets a brief bounce but a clear resolution has yet to materialise. European indices rose on Greek hopes but gave up all gains at the close as trading was halted in two italian banks.
Italian banks UniCredit and Intesa Sanpaolo fell 5.5 and 4.3 percent respectively, as worries circulated about their capital positions and the deepening euro zone crisis. UniCredit hit a two-year low. Both stocks were suspended for part of the session, due to the sharp movements, but their volumes were still above their respective 30-day averages. US markets fell after a brief suspension in the trading of some big Italian banks raised new concerns about the European debt crisis, though better-than-expected durable goods orders kept losses limited.

This morning, Asian equities slipped and the US Dollar rose, with investors positioning their portfolios ahead of a Greek vote on unpopular fiscal austerity measures this week and a gauge of U.S. factory activity that is expected to show slowing growth.

Last week the US Dollar rose and commodities and global markets fell. Since late April, reports on manufacturing, retail sales, home sales and other economic indicators have come in weaker than economists anticipated. Europe's debt problems and a slowing growth rate in China have also raised concerns about the global economy. With the daily volatility and downbeat sentiment coming from all angles investors are running scared.

To summarise, all these events reported last week are weighing on the markets:-

On Wednesday, Federal Reserve Chairman Ben Bernanke said problems plaguing the U.S. economy may last longer than previously thought. He also warned that the economy is weaker than previously forecast, and lowered this year's gross domestic product growth estimate to 2.9 percent from 3.3 percent.

On Thursday, Greece's new finance minister sought to explain gaps in his austerity plan to EU and IMF officials, with European leaders insisting on deep spending cuts and tax hikes if Athens wants to secure funds and avoid potential default.

The euro tumbled on Thursday, and the dollar's gain, partly on a "flight to safety" was one factor pulling down metals and crude prices.

Meanwhile, in the US the continued rise in first-time claims for unemployment benefits indicated little improvement in the job market since May, when there was a drop in the number of new jobs created. New applications for unemployment benefits rose to 429,000 last week, from 420,000 the week before.

Finally, fears that the Chinese will raise interest rates in the face of a slowing economy and worries about the weak capital positions of Italian banks continues to bother investors.

This week markets will be mainly driven by the following two events.

Athens will vote on Wednesday the framework austerity package on tax increases and spending cuts, and then on its implementation on Thursday. It is critical for the country to pass the package to secure funding from international lenders to avert a sovereign default.

The U.S. Institute for Supply Management is expected to release on Friday data showing a slower rate of growth for factory activity in June after it grew at its slowest pace in May since September 2009.