Last week, ending with US Thanksgiving turned out to be a disastrous one for equity markets globally – Wall Street and Asian markets recorded their the worst weekly performance since Sep, Nikkei 225 hit the lowest level since Apr 09, Dubai stocks hit a 7-year low and the Egyptian bourse closed at its lowest in more than two and a half years. Sterling fell to a seven-week low while the Indian rupee continued to be one of the worst-performing emerging market currencies against the dollar. The worsening global outlook led commodity prices down, with aluminium prices falling below $2k a tonne for the first time since 15 months.
A dismal week for markets despite positive data from the US, as Eurozone’s political tensions continue to hurt investor sentiment and Spanish elections take centre stage. This was reflected in regional markets as well with most indices down almost 1% from a week ago. Dollar strengthened (dollar index up +1.5%) and the euro came under pressure while haven demand helped the pound; Indian rupee fell to a 32-month low sliding to 51.20 against the dollar. Commodity prices were mostly lower last week, with gold down by almost 4%.
The markets continued to be volatile in the backdrop of the dramas in Greece and Italy, with Italy’s 10-year debt soaring dangerously close to and above 7% last week - also driving euro to its lowest level against the dollar in a month. Risk appetite gradually improved on Friday with indications of political change suggesting greater likelihood of reforms, including austerity packages, leading to a market rally as Eurozone debt fears eased. Regional markets were mostly down last week, but the positive sentiment in Saudi market yesterday is likely to reflect in its regional counterparts’ behaviour today. The euro was down almost 0.3% compared to a week ago, while gold and oil prices were helped by the softer dollar.
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.