Weekly Market Summary

by Raymond Chatlani

On Monday, Asian stocks rose after US Federal Reserve Chairman Ben Bernanke left the door open for further action to stimulate the economy and fight high unemployment. European shares gained tracking a late rally in Wall Street on Friday, after U.S. Federal Reserve chairman Ben Bernanke raised hopes for more stimulus for the troubled economy at the U.S. central bank's September meeting. US stockmarkets rose supported by European and Asian equities that rallied partly on a possible merger between two big banks in Greece. Wall Street traders were also relieved that Hurricane Irene caused less damage than feared in New York City over the weekend.

On Tuesday, Asian stockmarkets rose after better-than-expected U.S. consumer spending data and a bank merger in Greece offered investors some rare good news about the outlook for indebted developed world economies. European indices initially fell except for London (which played catch up as it was a bank holiday on Monday in the UK) as consumer and business confidence in the eurozone economy slumped in August, falling for the sixth consecutive month, an EU survey showed amid rising fears of an economic slowdown. European markets recovered towards the end of the day and closed mixed. Wall Street closed positive in choppy trade as a recovery in risk appetite among some investors was countered by bearish economic news. U.S. consumer confidence hit a two-year low in August and prices of single-family homes dipped in June from May as the U.S. housing market continued to crawl along at depressed levels, data showed.

On Wednesday, Asian stockmarkets rose as investors put aside concerns over flagging consumer and business confidence in developed economies to hunt for bargains after gains on Wall Street. European shares rocketed on hopes the U.S. Federal Reserve would support the fragile recovery with fresh stimulus measures. US markets rose as hopes for more help from the U.S. Federal Reserve drove buying in equities, oil and metals.

On Thursday, Asian markets rose as China's official purchasing managers' index rose to 50.9 in August from a 28-month low of 50.7 in July, official data showed, while upbeat sentiment across financial markets lifted Asian stocks on hopes the U.S. Federal Reserve would intervene to support the economy. European shares slid on dismal eurozone manufacturing figures, making a downbeat start to September after an extremely volatile August which was haunted by shadows of global recession but recovered towards the close with investors encouraged by data showing U.S. factory activity cooling in August but still expanding. The eurozone manufacturing purchasing managers' index (PMI), compiled by Markit, logged 49.0 points in August, down from 50.4 in July. Any score below 50 indicates contraction, while anything above suggests expansion. US stockmarkets fell as data spurred fears of recession as investors wait for tomorrow's U.S. jobs data for August.

On Friday, Asian stockmarkets fell on weak global data and fears of recession. European markets plunged on renewed concern over the Greek debt crisis. US indices fell on very weak employment figures where the private sector created 17,000 jobs only in August which was offset by the US Government where employment went down by about 17,000 jobs. This last occurred sixty years ago.

This morning, Asian markets fell on Friday's disappointing US jobs data.

Last week, global equities and commodities fell on fears that the global economy is entering recession. Consumer and business confidence slunped in the Eurozone and US during August. In the US, prices of single family homes dipped in June which shows that the US housing market has not yet reached bottom. On Friday, The zero net growth in US jobs in August reinforced concerns that the US economy has stalled. Gold and silver were the only beneficiaries.

While two weeks ago, mounting speculation that the Fed is preparing a new round of monetary expansion helped the market regain its footing, last week both businesses and consumers were very worried by the slowdown in domestic economic activity, heightened financial market turmoil, ongoing serious concerns over the eurozone sovereign debt situation and increased fears over the health of the global economy. Investors fear that without further stimulus, the global economy will fall into recession.
Short term, the markets will have to jump the hurdle of this Wednesday's German Federal Constitutional court ruling on suits claiming Berlin is breaking German law and European treaties by contributing to multi-billion euro bailouts of Greece, Ireland and Portugal. Longer term, the result of the FEDS two day meeting on 20-21 September will greatly affect markets as the Federal Reserve are under pressure to provide more stimulus to aid the frail recovery.

Volatility is expected to continue until we know the outcome of these two important events.