Weekly global market review: 4 – 8 August

13th August 2008, Comments 0 comments

Sharp declines in oil and commodity prices saw global stock markets regain some of their composure and many registered gains for the second consecutive week.

4 - 8 August

US stock markets moved decisively higher, with sentiment buoyed up by a combination of weaker oil prices, broadly positive earnings announcements from many companies and the Federal Reserve (Fed)’s decision to leave interest rates on hold.

Against this backdrop, the S&P 500 was up by 2.9 percent (its strongest weekly gain since April), while the Dow Jones was rose 3.6 percent.  The Nasdaq managed to climb by 4.5 percent.

The Japanese stock markets bucked the global trend and ended the week down, with the Topix falling by 1 percent while the Nikkei 225 was down by 0.6 percent. Some of the market weakness was attributable to timing differentials, with markets missing out on the end of week oil price-related rally in the US and the eurozone.

Markets consequently were dominated by economic news, with the government noting that Japan, the world’s second largest economy, might already be in recession.

Eurozone markets generally posted solid gains over the week, with Germany’s Dax up by 2.6 percent and France’s CAC 40 rising by 4.1 percent. Sentiment was bolstered by weaker oil and commodity prices and also by a stronger US dollar.

The US dollar neared a five-month high against the euro, providing a welcome boost to eurozone companies exporting to the US.

In the UK, gloomy earnings announcements from several of the country’s leading financial institutions failed to derail the upward trend. The FTSE 100 rose by 2.5 percent over the week, while the FTSE All Share was 2.7 percent higher.

Asia & Developing Markets
Like their counterparts in Japan, markets in Asia-Pacific missed out on the week-end global rally and most consequently finished lower.

Stock markets linked to the China theme had a particularly tough week. Expectations of an Olympics-related rally failed to materialise and mainland China shares continued to sell off amid fears that terrorist attacks could disrupt the games.

Against this backdrop, Hong Kong’s Hang Seng fell by 4.3 percent, while the Hong Kong China Enterprises index of mainland stocks listed in Hong Kong was down by 6.4 percent.

Latin American markets were hit by weaker oil and commodity prices and most ended the week lower. Brazil’s Bovespa fell by 1.8 percent, while Mexico’s Bolsa. Elsewhere in the emerging markets space, Russia’s stock market plunged to fresh lows, falling by 11.3 percent amid fears of conflict between Russia and Georgia over the breakaway Georgian enclave of South Ossetia

Government bond markets saw significant yield curve steepening in the US as speculation that the Fed could increase interest rates appeared to moderate.

The US dollar staged a strong comeback against all other major currencies.

Crude oil prices fell below USD 120 per barrel for the first time in three months, ending the week significantly below this threshold. The decline seemed driven by concerns about demand destruction after the US Department of Energy reported an increase in crude inventories amid lower demand.

Other commodity prices also retreated, as did the gold bullion price on the back of weaker oil prices and a stronger US dollar.

For further information, or to discuss how current global economic conditions are affecting your investments, please feel free to contact Craig Welsh at Spectrum IFA Group or visit www.expatfinance.nl.

This commentary was compiled with the assistance of BlackRock, one of the world’s leading investment management groups.

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