Strong industrial production numbers out of China and better-than-hoped for US retail and consumer confidence data helped global equities finish a choppy week on a positive note.
But watch the greenback it had a strong day Friday off the back of the Chinese and US data.
US regulators closed three small regional banks on Friday, bringing the total number of bank failures so far this year to 133.
None were large, but were a reminder that the US banking system remains badly wounded, especially in the heartland of the US economy.
Later today we will find out if the Dubai property company, Nakheel defaults on a near $US3.5 billion dollar Islamic bond.
Bloomberg reported that two other Islamic loans,with a value of $US1.75 billion in debt could be affected by any default, taking the size of the possible default to $US5.25 billion.
Although it is widely expected, default by a Dubai-state owned company will crystalise fears about the country’s finances, and trigger renewed fears about other sovereign debt, such as Greece.
Any default will see renewed interest in the US dollar.
The Dubai sharemarket rose yesterday as rumours circulated of a "deal" between Nakheel and its banks.
There’s also a developing situation in Austria involving that country’s sixth largest banking group (Hypo Group Alpe Adria) that needs more capital (over a billion euros by some reports).
Its 67% owner, the Bavarian state-owned bank BayernLb is proving slow to contribute to the recap of the Austrian group, which has major loans and banking interests in Croatia and other parts of the old Yugoslavia.
Coming after the problems in Dubai, fears about Greece’s financial health and similar worries about Spain, Ireland and Portugal (not to mention Italy, and more distantly, the UK), the emergence of what would normally be a minor financial blip in Austria, could having a larger impact if not resolved.
Austria injected 900 million euros in capital in Hypo just before the end of 2008, but only after BayernLB paid in 700 million euros.
It was the fourth year-end emergency capital increase for Hypo in three years.
The Austrian government wants money from the shareholders (which include an insurer and an Austrian state government as well) before the central bank will commit funds to a new rescue.
So it might be a nervy start to the week in Europe, after the strength shown in Asia and the US on Friday.
Again, it will pay to keep an eye on the strengthening US dollar which hit a five-week high on Friday.
Wall Street lost some of its early gains Friday, but finished up on the day and the week.
The S&P 500 in New York rose 0.4%, the Dow rose 0.6% and the Nasdaq was off marginally.
London’s FTSE 100 added half a per cent and Asian markets were mostly stronger, especially Tokyo where the Nikkei rebounded strongly after two days of losses.
For the week, the Dow was up 0.8%, the S&P was little changed and the Nasdaq shed 0.2%.
The FTSE Asia Pacific index climbed by 0.8% after the Chinese economic statistics for November were stronger, with production growing at its fastest rate in two and a half years.
The Shanghai Composite Index ended Friday with a loss of 0.2% as investors worried about the return of inflation in November.
Hong Kong’s Hang Seng avoided a sixth consecutive day of losses by jumping 0.9% and Taiwan rose 1.5%.
The star performer was Tokyo, where the Nikkei jumped 2.5% to regain the 10,000 level. The yen fell as the US dollar remained firm.
Australia’s ASX 200 advanced 0.6%, South Korea’s Kospi added 0.3%, but India’s Sensex eased in late trading.
But it was a different story over the week.
The MSCI Asia Pacific Index fell 0.4% last week, a small turnaround from the previous week’s huge 5.5% gain, the biggest rise in seven months.
Friday’s rise for the Nikkei pushed it up 0.9% for the week, a big slowing from the 10% jump the week before and no doubt due to the sharp cut in the third quarter economic growth estimate.
South Korea’s Kospi Index climbed 2%.
Hong Kong’s Hang Seng Index fell 2.7% and the Shanghai market fell 2.1%. Australia lost 1.4%, even after the strong November employment report.
The US dollar rose in US trading after the good figures were released.
Gold and oil fell as the dollar rose.
The cause was the better than forecast November retail sales and an unexpected rise in business inventories in October which pointed to a recovery in consumer spending. A private survey also showed consumer sentiment improved in early December.
Retail sales rose 1.3% last month, the largest advance since August, the US Commerce Department said on Friday.
It was the second straight monthly gain and easily beat market expectations for a rise of 0.7%.
Consumer sentiment improved in early December on signs of stabilization in the labor market with the Reuters/University of Michigan Surveys of Consumers’ preliminary index of sentiment for December rising to 73.4, just a touch below the year’s high set in September, from 67.4 in November.
Australian shares ended last week with a gain – ending a five-day losing streak – but it was not enough to prevent the market from having its third weekly loss in the past four weeks.
The ASX200 index was up 28.5 points, or 0.6%, at 4635.2 points, while the All Ordinaries also added 28.5 points, or 0.6%, to 4651.4 points.
