Weekly Market Summary

by Raymond Chatlani

On Monday, Asian stocks climbed and the euro inched higher after policymakers approved an emergency tranche of funding for Greece, offering a lifeline to the debt-stricken nation while strong U.S. data also boosted demand for risky assets. Euro zone finance ministers on Saturday approved a 12 billion euro instalment of Greece's bailout and said details of a second aid package for Athens would be finalised by mid-September. European markets mostly rose as worries about Greece receded further. Volume was low, at 56.6 percent of the index's 90-day average, with no direction provided by Wall Street, closed for the Independence Day holiday.

On Tuesday, Asian stockmarkets mostly fell modestly after rating agency Moody's said China's local government debt burden may be 3.5 trillion yuan ($540 billion) larger than auditors estimated, putting banks on the hook for deeper losses. European markets rose modestly on low volume. US stocks were little changed as concerns about further monetary tightening in China and soft euro-zone economic data made investors cautious.

On Wednesday, Asian stockmarkets fell after Moody's slashed Portugal's credit rating to junk status, reigniting fears that it may need a second rescue package. European markets fell on the Portugese downgrade and China's interest rate rise sparked jitters about global growth prospects. China's central bank increased interest rates for the third time this year today, making clear that taming inflation is a top priority as its economy gently slows. Although Portugal's credit downgrade pressured global stocks and China's rate hike weighed on commodities, Wall Street paid little heed and pushed shares higher.


On Thursday, Asian stockmarkets rose as investors judged that the People's Bank of China is getting closer to taking a break from its multiple increases in policy rates and bank reserve requirements as the economy shows signs of losing steam. European indexes rose after the ECB raised interest by a quarter percent to 1.5 percent as expected by investors and on improved US labour data. US markets rose after data showed an improvement in the labor market ahead of Friday's key U.S. government monthly payrolls report and as retail sales came in stronger than expected, raising hopes that economic recovery was gaining traction. A report by payrolls processor ADP showed U.S. private hiring increased by 157,000 in June, well above the expected 68,000, bouncing back from a surprise slump the month before. A separate report from the Labor Department showed initial claims for state unemployment benefits dropped 14,000 to a seasonally adjusted 418,000 last week. The decline was more than economists's expectations for a fall to 420,000.

On Friday, Asian markets rose following good labour and retail sales data in the US the previous evening. Both European markets and Wall Street fell after the government said businesses added the fewest jobs in more than a year in June and the unemployment rate rose to 9.2 percent and on fears that the eurozone's debt crisis will engulf Italy. The US economy generated a net 18,000 new jobs in June, and the number of jobs added in May was revised down to 25,000, the Labor Department said. Italy's benchmark index, the FTSE Mib, closed 3.5pc down amid worries that political jostling in Rome threatens the country's fiscal stability. The flight from Italian government debt saw the yield, or return, on its 10-year bonds touch 5.3pc, a euro-era high.

This morning, Asian stockmarkets fell on Friday's poor US jobs report and today's emergency ECB meeting over the debt crisis. Australia tumbled the most as it was unveiled on Sunday that the 500 worst polluters are to pay 23 Australian dollars ($25) for every ton of carbon dioxide they emit, with the government promising to compensate households hit with higher power bills under a plan to reduce greenhouse gas emissions.

Last week, global markets rose for a third consecutive week with commodities continuing their appreciation in price. The resolution of the Greek debt crisis and investors perception that China would bring inflation under control by the last quarter of 2011 were the main catalysts for these rises.

However, markets fell on Friday on the low number of jobs created in the US during June and fears that after Greece and Ireland that Italy will be the next country that will have a fiscal crisis.

Investors are worried that Giulio Tremonti, Italy's finance minister, is threatened by corruption accusations against a former aide and seems to have lost the support of his prime minister Silvio Berlusconi. The fear is that if Mr Tremonti is forced out of government it could derail the austerity measures he has pushed through to bring down Italy's huge debt, which amounts to around 120pc of its GDP. That would leave Italy in greater danger of being sucked into the turmoil which overtook Greece and Portugal, as doubts about their finances saw them shut out of the international debt markets.

This week markets will be focusing on this morning's emergency ECB meeting over how to stop contaign spreading to Italy and US second quarter corporate earnings.