Markets were in pre-festive mood and trading was drifting in low volumes – even US macro data signaling move towards recovery failed to excite markets. In Europe there were mixed effects stemming from the support by the Chinese authorities and the downgrade of Portugal. KSA hit a 7-month peak after the 2011 budget was announced. The euro fell for a third-straight week against the USD and the yen on the rating downgrades. Oil closed at $90 on Fri – the highest in more than two years due to cold weather, sharply lower US inventories and the OPEC’s decision to keep oil output unchanged, while gold continued its rally.
Markets were relatively quiet this week, with the exception of Europe where the Moody’s action on Spain and Greece (placed on credit review for possible downgrade) and Ireland (downgraded by 5 notches) took its toll. Regional markets had an eventful week - Qatar stocks hit a new 26-month high (Tues) and DFM touched a 13-week low (Wed); compared to a week ago all markets bar Saudi closed at a lower level. The euro continued to fall against the dollar, while the pound fell after UK inflation and unemployment rose. Gold was volatile, closing lower compared to a week ago while oil prices are still hovering around the $87-90 band.
Markets are giving a warm reception to the US tax deal and made gains globally, although EM were on a softer tone. Regional markets were up, with Qatar benefitting the most after winning the World Cup bid. Higher US Treasury yields supported the dollar, while both oil and gold weakened.
Markets worldwide were hit by the Irish fiasco and the liquidity absorption measures in China but later in the week they recovered. Regional equities are mirroring emerging markets with Qatar stock in a celebration mood for the 2022 World Cup. A flight to safety is benefitting US Treasuries and the dollar, despite rebound of the euro and the yen, while oil and gold are again on the rise with oil closer to 90$/b.
Markets have been driven in opposite directions by the Irish bail out and some positive news on US jobs and German Ifo. However the net result is still negative. Regional markets also mirrored the global trend, with only the Abu Dhabi market registering a small 0.5% rise from last week. The euro came under renewed pressure with investor concerns on Portugal and Spain debt while oil and gold prices rose on renewed contagion worries.
A mixed week for markets worldwide: European markets are awaiting the decision on a possible Irish bailout plan by end of this week. The rise in Chinese bank reserve requirements weighed on investor confidence while TOPIX advanced on the weaker yen, closing above 10000 for the first time in 5 months. Regional markets were closed most of last week for Eid. The euro advanced last week on the expectation of the Irish bailout package while commodity prices (oil and gold) declined compared to a week ago on demand concerns.
China's equity market plunged 6.2% overnight on Friday in a lagged reaction to the data released on Thursday pointing to strong growth, but higher inflation. The markets are anticipating Chinese monetary tightening. In fact all other markets, except Japan, ended the week with substantial losses. This episode confirms that Chinese contribution to world liquidity, which is likely to be further squeezed, is a key factor in global equities. The dollar rebounded sharply bringing down gold prices. Energy commodities were generally weaker.
Equities markets have been driven by the reaction to the QE2 announced by the Fed. Regional markets were mostly up except Oman and the UAE, whose indices were weighed down by property stocks; the DFM index dropped almost 2.5% after hitting a six-month high on Monday. Commodities, primarily oil and gold, have rallied since the Fed’s announcement alongside a weak dollar, which hovers around its lowest level of the year.