CMC Markets Weekly Report

Stocks in the U.S finished higher Friday in a highly volatile week, with the Dow logging its first two-day rally since early July. Despite the wild market swings in the last several days, all three major averages are down less than 2 percent for the week. The Dow Jones Industrial Average rallied 125.71 points on Friday, or 1.13 percent, to finish at 11,269.02. The S&P500 gained 6.17 points, or 0.53 percent, to end at 1,178.81, while the Nasdaq rose 15.30 points, or 0.61 percent, to close at 2,507.98.

On the economic front, consumer sentiment plunged to its lowest levels in more than three decades, according to the Thomson Reuters/University of Michigan survey as investors were spooked by high unemployment, low wages and the debt ceiling debate.

Meanwhile, retail sales rose in July, their biggest gain since March, according to the Commerce Department, and business inventories posted a smaller than expected gain in June.

European shares closed higher as investors snapped up beaten-down sectors, led by the banking sector, following the short-selling ban on financial shares by France, Italy, Spain and Belgium. Meanwhile, French President Nicolas Sarkozy and German Chancellor Angela Merkel are scheduled to meet tomorrow night to discuss issues in the euro zone.

Gold prices dipped for a second day, sliding from session highs above US$1,800 an ounce earlier this week, on improved appetite for risk. Gold eased US$21.30 to US$1746.30/oz, as the nervousness across markets subsided slightly.

Currencies were quieter on Friday, with the US dollar index barely changed at 74.57. The Aussie is also steady at US$1.0351. Silver managed another 1% gain but base metals took a breather in London, slipping less than 1% across the spectrum.

Data-wise, a quiet week in Australia sees vehicle sales today and the June quarter wage cost index and the Westpac leading economic index on Wednesday. Tomorrow the RBA will release the minutes of its August monetary policy meeting but given that meeting was held prior to the US downgrade, the minutes may not prove much of a guide. We know that the central bank held off on a rate rise given a return of uncertainty offshore, but as to whether that uncertainty has sufficiently escalated now to suggest an RBA rate cut ahead is not something the minutes will be able to tell us.

Last week saw a rare occurrence – that of the RBA governor making a public statement in view of the volatility being experienced in the stock market. He noted that the RBA was in the money market conducting its open market operations as usual and it was not seeing any dysfunction.

In an uncertain market, today's local earnings result highlights include Ansell (ANN), Leighton (LEI), Newcrest (NCM) and United Group (UGL).

The US is in for a pretty busy week of economic data, beginning tonight with the Empire State manufacturing index, the NAHB housing market index and Treasury international capital flows for June. Tuesday its housing starts and industrial production, Wednesday the PPI, and Thursday the CPI, existing home sales, the Conference Board leading index and the Philadelphia Fed manufacturing index.

Japan will release its estimate of June quarter GDP today, and the eurozone will follow suit on Tuesday. Clearly the world will be waiting with baited breath to hear what Sarkozy and Merkel might come up with on Tuesday night.