Weekly Market Summary

by Raymond Chatlani

On Monday, gold hit a record high above $1,620 an ounce, while the dollar steadied and Asian stocks slipped as investors piled into bullion over fears of a possible U.S. debt default as the debt ceiling talks in Washington stalled. Financials led european stockmarkets down on US debt concerns. US markets fell as political brinkmanship in Washington over the debt ceiling sparked fears of a U.S. rating downgrade. Gold surged to another record high, while oil and other commodities fell as the countdown for the United States to reach a debt deal or face a disastrous default drove investors into safer assets.


On Tuesday, Asian shares edged higher, bouncing back from a slide the previous day, after U.S. stocks posted only modest losses in reaction to the worsening deadlock in Washington over raising the debt limit and avoiding a technical bond default. Commodities rose broadly on Tuesday, with copper and corn outperforming the pack, as fear of a U.S. credit default sank the dollar and investors sought assets that could preserve value. European and US stockmarkets fell on a stalemate in US debt talks.

On Wednesday, Asian stocks rebounded and the U.S. dollar fell while gold hit a record high at more than $1,624 an ounce, as a drip feed of news out of Washington indicated politicians were making little progress on a plan to lift the U.S. debt ceiling. European markets fell for a third day as Italian banks tumbled in Milan as the Eurozone debt crisis resurfaced as Spain and Italy's borrowing costs marched back towards euro-era highs. Analysts said that this is due to Merkel's failure to confirm the bail-out plans until "after the parliamentary summer break". US stockmarkets fell amid continued gridlock for lawmakers debating how to avoid a debt default and a weak report on orders for manufactured goods. The government said that orders for durable goods fell 2.1 percent in June because of a drop in orders for commercial aircraft, automobiles and heavy machinery.

On Thursday, Asian markets tumbled following big losses on Wall Street, as the deadline approaches for US lawmakers to strike a deal to avoid a disastrous default. The White House and Democrats and their Republican rivals continue to bicker over a deficit-slashing plan that would allow a hike in the US debt ceiling, despite the government running out of money to pay its bills within a week. European shares fell for a fourth straight session to hit a one-week low as disappointing earnings and cautious comments from major European companies raised concerns about corporate profits. US stockmarkets fell as a stalemate continued over the U.S. debt limit even though there was a strong jobs report. The number of Americans claiming new unemployment benefits last week dropped below the 400,000 level for the first time since early April, a hopeful sign for the economy which has struggled to regain momentum.

On Friday, Asian stockmarkets fell as U.S. lawmakers squabbled over a compromise to avoid an unprecedented debt default, while growing worries about Europe's debt crisis weighed on the euro, adding to investor wariness. European markets fell after Moody's threatend to downgrade Spanish, adding to concerns that a Greek rescue package has done little to halt the spread of the eurozone debt crisis. Wall Street fell to post its worst weekly losses in nearly a year after data showed meager growth in the economy and debt deal deadlock kept investors nervous. The economy expanded at meager 1.3 percent annual rate in the spring after scarcely growing at all in the first three months of the year, the Commerce Department said Friday. Gold hit a new high of $1,632 an ounce.

This morning, Asian stockmarkets rose after U.S. President Barack Obama said congressional leaders agreed to raise the nation's borrowing limit and avert a default by the world's top oil consumer.

Last week, global markets fell significantly on fears of US lawmakers failing to lift the country's $14.3 trillion borrowing ceiling and risking a default and possible downgrade of its prized AAA credit rating as investors lost appetite for risky assets. Also, throughout last week's increasingly intense showdown in Washington over the U.S. debt ceiling, the spreads of Italian and Spanish bond yields over Germany widened sharply, signifying persistent unease that Greece's problem may spread to other European countries. Investors flocked to gold as a safe haven which hit a new record high of $1,632 an ounce on Friday.

This morning's news that the US debt ceiling will be raised should be positive for markets this week but will depend on whatever fiscal accord have been agreed. Details of this agreement will be revealed later today and tomorrow. European and US futures are already up and gold fell one percent this morning as investors are seeking riskier assets in anticipation of this new accord passing both the Senate and the House.