Weekly Markey Summary

by Raymond Chatlani

On Monday, Asian markets tumbled on rumours that European leaders would accept some form of Greek default. European shares rose on reports that European leaders were mulling additional ways to stem contagion from the Greek debt crisis. Their plan envisages an increase in the size of the bailout fund to 2 trillion euros and is expected to involve a 50% write-down of Greek government debt. Banks with large exposures to Greek debt would be strengthened to ensure stability should Greece partially default. US stockmarkets rose on hopes that European officials would stabilise the Eurozone debt problem.

On Tuesday, Asian shares rebounded on bargain hunting on hopes that euro zone officials will act to corral Greece's debt woes and prevent another full-blown banking crisis. European stockmarkets expleded higher amid hope that plans are being crafted to help restore the region's fiscal and financial conditions. Wall Street ended 1.5 percent higher but gave up half its gains at the close after initially opening up 3 percent.

On Wednesday, Asian markets closed mixed, after a second day of rallies on Wall Street and in Europe, on cautious hope that eurozone leaders are plotting a solution to the region's debt crisis. But the gains, the second in a row, quickly faded due to the lack of concrete evidence of a plan, while traders looked ahead to a key vote Thursday in Germany, where MPs will decide on expanding a rescue fund for debt-mired European countries. European and US stockmarkets fell due to the high degree of uncertainty about the European situation and its effects on economic growth. There is a split between EU members over the terms of Greece’s second €109bn bail-out with members including Germany and the Netherlands calling for more losses to be imposed on the private sector, something France and the ECB oppose for fears of another rout of European banking stocks.

On Thursday, Asian shares and commodities fell on growing worries that Europe's intractable debt problems will plunge the world economy into a second global financial crisis. European stockmarkets rose following the passing through the German Bundestag of plans to expand the European Financial Stability Fund (EFSF). US markets rose as traders were relieved that Germany passed a measure to expand the powers of a regional bailout fund. That eased worries that U.S. banks could be buffeted by another bout of turmoil in Europe's financial system.

On Friday, Asian stockmarkets fell as China, the world's biggest metals consumer, saw its manufacturing sector contracting for a third consecutive month in September, suggesting the world's second-largest economy was not immune to global headwinds, while factory inflation quickened. European markets fell as retail sales in Germany, Europe's largest economy, came in below expectations, dropping 2.9% in July. The reading marked the biggest drop in more than four years and underscored a possible slowdown in the global economy. Wall Street fell heavily as investors fled to the safety of US treasuries.

On Monday, Global markets continued to fall on fears that a Greek default is imminent. Greece reported that the deficit for this year would be 8.5 percent which is above the expected target of 7.6 percent. it was explained that this was due to a 5.5 percent contraction in GDP.

This morning, Asian stockmarkets continued their falls on growing doubts over Greece's ability to avoid default that fuelled fears of global financial turmoil and recession.

Last week global stocks posted their worst quarter in nearly three years in July-September, due to persistent fears about the world economy and the lack of a convincing solution to Europe's debt problems. All commodities fell heavily except for gold which recovered later on last week and yesterday as investors sought safe havens on growing expectations of a Greek default that has increased fears of a global recession. A bid for safety also increased demand for US treasuries.

In a couple of weeks Greece will declare bankruptcy as funds will run out. Unless the EU, IMF and the ECB provide funds soon, we can expect world markets and commodities to continue their falls this week as investors are fed up with rhetoric and have completely lost their faith and trust in Governments.