CMC Markets Weekly Report

Stocks finished mixed in the U.S. after a wild session Friday, with the Dow gyrating more than 400 points throughout the day as investors remained jittery over the state of the global economy. The Dow Jones Industrial Average finished 60.93 points higher for the day to close at 11,444.61, but was up 172 points at session high and down 245 points at its low. The S&P500 and the NASDAQ both ended lower, with the S&P500 down 0.06% at 1,199.38 and the NASDAQ down 0.94% at 2,532.41.

All three major averages are still in negative territory for the year. In addition, all three indexes are also trading in "correction territory" - defined as a drop of 10 percent from its peak - from their intraday high in Apr. This comes after stocks plunged sharply on Thursday with the Dow down more than 500 points, in its worst one-day drop since December 2008.

Stocks rallied briefly in the afternoon after Italy said it plans to speed up its fiscal consolidation timetable and introduce a balanced budget amendment in its constitution. The announcement followed earlier media accounts that the ECB had agreed to buy Italian and Spanish bonds if key structural reforms were brought forward.

Traders on Thursday had been disappointed that the ECB were buying Portuguese and Irish bonds instead of Italian and Spanish debt.

The ECB announcement inevitably sent the euro surging as well, resulting in the US dollar index falling 1% to 74.53 by day's end. On the implication of more global quantitative easing (ECB bond buying equates to ECB QE), gold jumped US$14.60 to US$1663.40/oz. The collapsing Aussie stopped collapsing and was only down 0.25% to US$1.0441.

Oil rebounded, sending Brent up US$2.33 to US$109.38/bbl and West Texas up US63c to US$87.27/bbl.

It was a different story for base metals. On Thursday all metals were down 1-3% but the LME missed the final plunge on Wall Street. There was thus, in theory, some catching up to do on Friday. On Friday, however, Wall Street had rebounded before 2.30pm. Yet base metals all closed down 3-5%.

Meanwhile, after market close on Friday night New York time, it was announced ratings agency Standard & Poor's had downgraded US sovereign debt to AA from AAA, the first such downgrade in ratings history. Last week both Moody's and Fitch elected to maintain their equivalent AAA ratings in the wake of the debt ceiling resolution but S&P has decided the bill did not go far enough.

On the economic front, hiring picked up in July as the Labor Department reported employers added 117,000 jobs last month and the unemployment rate dipped to 9.1 percent. Despite the positive data, some experts remained sceptical.

This week, the US Treasury will release its monthly budget on Wednesday along with the release of wholesale trade data, and the monthly trade balance will be revealed on Thursday. Friday sees business inventories, retail sales, and the fortnightly consumer sentiment index.

Ahead of Tuesday night's Fed meeting, China will deliver its monthly “data dump” of inflation, industrial production, and retail sales numbers. On Wednesday China will release its monthly trade balance. Trade balances are popular this week, given we'll also see Germany's and the UK's on Tuesday.

In Australia this week, the banks will release their monthly findings, starting with ANZ jobs ads today, followed by the NAB business confidence survey on Tuesday and the Westpac consumer confidence survey on Wednesday. Tomorrow also sees housing and investment finance, general lending finance and a June quarter summation of retail sales. Thursday is unemployment day.

Results season in Australia also steps up a gear this week. Today we'll see Bendigo & Adelaide Bank (BEN) and JB Hi-Fi (JBH), Tuesday it's Coca-Cola Amatil (CCL) and Cochlear (COH), Wednesday Commonwealth Bank (CBA) and Stockland (SGP), and Thursday Telstra (TLS) and Amcor (AMC) to name a few.

Also this week we have quarterly earnings from News Corp (NWS) on Thursday, a quarterly update from National Bank (NAB) on Tuesday, and quarterly sales results from Harvey Norman (HVN) on Tuesday and David Jones (DJS) on Thursday.