Weekly Market Summary

By Raymond Chatlani

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. European markets continued their falls on concerns that Greece could default. US stockmarkets initially fell but recovered towards the close after a report that Italy may get financial support from China lifted Wall Street.


On Tuesday, Asian stockmarkets rose after the Financial Times reported on its website on Monday that Italy had asked China to make "significant" purchases of Italian debt. European indices fell on concerns that the Greek debt crisis is still unresolved but rallied strongly into positive territory on rumours that emerging countries would purchase European debt. US markets initially fell but closed strongly positive by headlines that suggested BRIC countries are in talks to purchase eurozone debt.

On Wednesday, Asian stocks fell after Moody's Investors Service downgraded credit ratings on Credit Agricole and Societe Generale by one notch, as expected, citing their exposure to the Greek economy. European and US stockmarkets rose as optimism over tentative steps to resolve Europe's debt crisis overcame still widespread fears that Greece will ultimately default on its debt.

On Thursday, Asian markets mostly rose on optimism that Europe will be able to get a handle on its sovereign debt crisis after reassuring words from European leaders aimed at soothing jittery financial markets. In a teleconference Wednesday night, German Chancellor Angela Merkel and French President Nicolas Sarkozy pledged to help Greece avoid a debt default and Greek Prime Minister Papandreou renewed his commitment to debt-reduction targets. European stockmarkets rose for a second day after the ECB said that it had decided to launch three-month loans in coordination with the U.S. Federal Reserve, the Bank of England, the Bank of Japan and the Swiss National Bank. Wall Street rose after central banks in Europe and the U.S. announced a joint move to support European banks.

On Friday, a decision by European central banks to support the region's financial system helped calm Asian markets, setting off a rally across the region. European and US stockmarkets rose on improved sentiment as traders chased gains following the previous day's joint announcement by various Central Banks that unlimited three month US Dollar loans would be provided to banks until the end of the year.

This morning, Asian stockmarkets fell after German Chancellor Angela Merkel's reiteration on Friday of her objection to the introduction of euro bonds, and an unexpectedly low 75 percent participation in Greece's debt initiative, below the 90 percent target.

Last week global equities rose on expectations that Italian bonds would be purchased by China, that the BRIC countries would purchase Eurozone bonds and that a number of Central banks launched a joint operation to pump liquidity to European banks to withstand the Eurozone debt crisis.

At the moment markets are in limbo with a lot of cash waiting in the sidelines as investors are torn between a possible recession in the US and Europe or whether these regions will be able to limp along with anemic growth. Also, weak leadership in the European Union where different countries have diverse views as to how to resolve the Greek default problem is keeping investment flowing to the EU. The most recent event is Merkel's objection to the introduction of Euro bonds while most European leaders are in favour of utilising this tool as needed.

This week the main event that will influence markets is the outcome of the two day FEDS meeting which will end on Wednesday where investors are eagerly waiting to see what monetary policies will be launched by US Federal Reserve Chairman Ben Bernanke. These policies may sway markets either way where confidence will be restored or see the present poor sentiment deteriorate.