Weekly Market Summary

by Raymond Chatlani

On Monday, Asian markets fell on Friday's disappointing US jobs data. European stockmarkets plunged as risk aversion and ongoing concerns about the eurozone debt crisis weighted on market sentiment. Wall Street was closed for the Labour day holiday.

On Tuesday, Asian stockmarkets fell amid fears that Europe's sovereign debt troubles are worsening and could trigger a second full-blown banking crisis after European stocks tumbled 4 percent on Monday, with financial shares falling to their lowest in more than 2 years. European markets continued to fall amid doubts about the will in Italy and Greece to push through austerity measures demanded by their partners, and hardening opposition to further aid in the bloc's paymaster Germany. US markets fell as they caught up with the markets after being closed yesterday due to a holiday in the USA.

On Wednesday, Asian stockmarkets rose on bargain hunting as value driven investors bought equities. European markets rose after a German court ruled against blocking bailout packages. Germany's Constitutional Court rejected a series of lawsuits aimed at blocking Germany's participation in bailout packages for Greece and other euro zone countries, but said parliament must have a bigger say in future rescues. Wall Street rose on relief that the bailout could continue in Europe.

On Thursday, Asian markets closed mixed as investors waited for statements from the ECB and US FEDS chairman Bernanke on anticipation that some form of quantitive easing would be announced. European stockmarkets rose as the ECB held rates at 1.5 percent. US indexes fell as investors were disappointed that while Bernanke did state that the FEDS would do everything to aid economic growth and employment, there was no indication as to what monetary tools would be used to support economic growth. Gold recovered after falling 3 percent the previous day as President Obama announced a $447 billion jobs plan to spur job growth, a mix of tax cuts and new spending. This is bullish for gold as more money is expected to be printed to support this plan.

On Friday, Asian stockmarkets closed mixed as traders weighed news China's inflation moderated slightly against disappointment that Fed chief Ben Bernanke offered no immediate support for the ailing U.S. economy. European and US markets fell as a jobs proposal by President Barack Obama did little to reassure investors concerned about weak economic growth. German Stark, a top ECB board member resigned with both Europe and the US falling further at the close.

This morning, Asian markets plunged after Friday's steep selling in Europe and the US. Also, as the dollar strengthened, investors shunned commodity risk because of Europe's deepening sovereign debt crisis. Friday's resignation of ECB board member German Juergen Stark has cast further doubt that Europe has the ability to tackle its worsening sovereign debt crisis.

Last week, global equities and commodities were decimated as investors worry that the US is falling into recession and on concerns that Europe's sovereign debt crisis is deepening. The only assets that finished in positive territory were gold and the US Dollar as safe havens were sought.
Although Italy's centre-right government promised on Tuesday to hike value-added tax as it bowed to market pressure for more action on its swollen debt and ignored mass street protests and strikes against its austerity measures and Greece's finance minister pledged to speed up delayed privatisations and structural reforms, while his Irish counterpart said Dublin was considering making a deeper fiscal adjustment than planned next year to boost market confidence, investors fled from equities, sold the Euro and purchased the US Dollar and treasuries. Greece's one year bond hit yields of over 80 percent last week, which is signalling that the markets believe that a default is inevitable.

Unless world leaders come up with clear fiscal policy solutions, we can expect global markets to continue to be volatile with a bias towards lower values.