CMC Markets Weekly Report

Stocks in the U.S erased most of their earlier gains to finish near the flatline in thin trading Friday, as investors booked profits ahead of the weekend following a robust rally all week. All three majors posted an impressive 7 percent gain for the week.

The Dow Jones Industrial Average finished slightly lower to close at 12,019.42, but still logged its second best weekly point gain ever and ended in positive territory for 2011. The S&P500 and the NASDAQ ended narrowly mixed, closing at 1,244.28 and 2,626.93 respectively.

Non-farm payrolls increased 120,000 last month according to the Labour Department, while the jobless rate declined to a 2-1/2 year low of 8.6 percent. Economists had expected a gain of 122,000.

Currency traders appeared also to be squaring up, with the US dollar index rising by 0.4% to 78.63. The Aussie was off slightly to US$1.0213 and gold was barely changed at US$1745.70/oz.

Base metals were mostly underwhelming with the exception of nickel. A drop in inventories was enough to trigger technical buying and nickel jumped 5%. Brent crude rose US90c to US$109.94/bbl and West Texas gained US93c to US$101.13/bbl.

Earlier, stocks got a boost following a report that the ECB may be gearing up to lend as much as 200 billion euros to the IMF to ease the sovereign debt crisis, according to Bloomberg.

Investors will be focusing on the European summit in Brussels at the end of the week as the euro zone leaders will yet again be expected to discuss changes to the EU treaty to better enforce fiscal discipline.

German Chancellor Angela Merkel said in a speech to German members of parliament that it was pointless to even consider Eurobonds. Merkel said there was no single quick fix and no fast and easy solution to the euro zone debt crisis, and called for a fiscal union and tighter controls.

French President Nicolas Sarkozy said he would support more severe sanctions for budget sinners in Europe.

On the economic front, following on from the global round of manufacturing PMIs last week will be the November service sector PMIs, with all of Australia, China, the eurozone, UK and US reporting over the next 24 hours.

For the US it then becomes a quieter data week featuring factory orders tonight, wholesale trade on Thursday and the trade balance on Friday, along with fortnightly consumer sentiment.

There'll be industrial production numbers and trade balance data from Europe and the UK this week, as well as another revision of the eurozone September GDP on Tuesday. This will lead us up to rate decision from both the ECB and Bank of England on Thursday. The ECB is expected to cut.

Locally, a rate cut by the RBA is looking more likely given the announcement of coordinated currency swap measures by the major central banks last week. The move was a response to the deteriorating situation in Europe, and the RBA has signalled that Europe will also dominate Australian policy at this stage.

It's a big week for economic data in Australia given the release of the September GDP result on Wednesday. After a difficult third quarter from a sentiment point of view, economists are expecting a result of 1.0 percent growth (qoq) down from 1.2 percent in June.

Today it's company profits and inventories, ANZ job ads and the TD Securities monthly inflation gauge (along with services PMI), and tomorrow it's net exports, the current account and ABARES quarterly crop forecast, whilst Wednesday brings the construction PMI.

If that's not enough, the unemployment numbers are out on Thursday and following on from Tuesday's rate decision, the RBA governor will make a speech.

Then to wrap the week ahead of the EU summit we'll have the monthly data dump from China, featuring inflation, industrial production and retail sales data.