US markets finished their best week in more than two months on Friday as tensions in Europe eased.
But the relief from the eurozone may not be for long (see above story) or very sustaining for sentiment to recovery.
But of equal interest this week to US markets will be the US Federal Reserve’s two-day meeting to discuss the economy.
Its post meeting statement early Thursday morning will make warm and soothing noises about helping the US economy, but do nothing until November in terms of any form of new assistance (see Diary), such as more stimulus.
The Fed will want to see the jobs data for September and October, plus the final second quarter and early third quarter figures on growth and inflation, before making a decision on any more stimulus spending.
In the US, the Dow Jones rose 75.91 points, or 0.7%, at 11,509.09 on Friday.
It was the index’s longest win streak since the five-day period ended July 1.
The Dow rose 4.7% for the week, its first weekly gain in three.
The Standard & Poor’s 500 Index ended 6.9 points higher at 1,216.01.
The S&P 500 jumped 5.4% last week.
The Nasdaq Composite Index advanced 15.24 points, or 0.6%, to 2,622.31, up a solid 6.3% from last Friday’s finish.
Bloomberg said that was its best weekly percentage gain since July 2009.
(One notable move in the S&P 500 companies came with the US-listed shares of Research In Motion Ltd. They fell 19% a day after the BlackBerry maker reported a sharp drop in second-quarter profit and cut its forecast. It is a situation to keep an eye on in the tech sector.)
Tonight markets will have to contend with the deficit cutting plan of President Obama.
US reports say there is no doubt that President Barack Obama’s deficit-reduction plan will top $US1.5 trillion, but the key question is by how much.
In his speech to a joint session of Congress last month, the President said he would present “an ambitious deficit plan” to the new congressional supercommittee on Monday.
The supercommittee is looking for ways to cut deficits by at least $US1.5 trillion and has to report back by the end of November.
Experts said it is just sound politics for Obama to surpass that goal and Marketwatch said, "Analysts were divided about whether Obama will “go big” with a plan to cut the deficit by $3 trillion or more or “go small” with a proposal nearer $2 trillion".
One of the proposals to be revealed is a tax on people earning more than $US1 million a year. (Watch the tax minimisation industry flourish on that move!)
The cuts and tax changes won’t start until 2013, assuming he retains the Presidency in the election a year from November.
The calmer market conditions saw bonds sold off, especially in the US with the 10 year yield rising to 2.05% by Friday, from around 1.91% the Friday before.
In contrast to the sharp rise on Wall Street, the Australian market shed 1.1% in value last week, despite a solid rise Friday.
And despite the gains on Wall Street, the Australian Share Price Index futures contract could only manage an 8 point gain in trading overnight Friday.
That means the local market will open flat at best and wait for its lead from offshore.
On Friday, the ASX200 jumped 77.7 points or 1.9% on Friday, to 4149.39 points.
The All Ordinaries index rose 76.7 points, or 1.8%, to 4229.9.
Last week’s loss of 1.1% took the year’s loss so far down 13%.
In other markets, the dollar gained 0.3% in overnight trade Friday to end the week at $US1.0361, down nearly a cent on the New York close the previous Friday and around 2.5c in the past two weeks.
The MSCI Asia Pacific Index fell 0.4% last week, after the 2.7% drop the previous week.
Hong Kong’s Hang Seng Index fell 2.1% over the week (but was up 1.4% on Friday).
Japan’s Nikkei rose 1.5% for the week (up 2.2% for the week) and South Korea’s Kospi index also ended the week up 1.5% and a big 3.7% on Friday.
The Shanghai Composite Index was up just 0.1% on Friday and ended the week down 0.6%, its third weekly loss in a row.
The Shanghai index is down 12% so far this year after the 14% drop in 2010.
Indian stockmarkets ended slightly high on Friday after the Reserve Bank of India lifted its lending and borrowing interest rates by 0.25% to 8.25% and 7.25% respectively.
The central bank said inflationary pressures persist in the economy, despite slowing growth.
Industrial production is slowing, and the economy grew at an annual rate of 7.7% in the June quarter, the slowest rate for 18 months.
In Europe, the Stoxx Europe 600 Index added 0.6% on Friday and 2.5% for the week as calm returned to financial markets after the central bank US dollar swamp was announced on Wednesday.
Germany’s Dax jumped 7.4% last week, London’s FTSE 100 was up 3% and Paris’s CAC 40 ended up 1.9%.
But the CAC is still down 20% for the year, the Dax is off more than 19% and the Foostie is down 9%.
Commodity markets remained in the back seat again last week as tensio
