CMC Markets Weekly Report

Stocks finished near session lows Friday, breaking a three-day winning streak, sparked by fresh fears over the euro zone sovereign debt crisis and after a batch of mixed earnings reports.

Stocks finished near session lows Friday, breaking a three-day winning streak, sparked by fresh fears over the euro zone sovereign debt crisis and after a batch of mixed earnings reports.

The Dow Jones Industrial Average tumbled 120.79 points, or 0.93 percent, to close at 12,822.57. The S&P500 fell 13.85 points, or 1.01 percent, to end at 1,362.66 and the Nasdaq dropped 40.60 points, or 1.37 percent, to finish at 2,925.30.

Stocks had rallied for most of the week thanks to gains in techs, and after Federal Reserve Chairman Ben Bernanke said the central bank stands ready to act if needed.

The ongoing sovereign debt woes in Europe took centre stage once again as euro zone finance ministers agreed to lend up to 100 billion euros to Spain so it can recapitalise its banks. Ten-year Spanish bond yields hit euro-era highs amid worries that the country will eventually run out of funds and need a sovereign bailout.

European shares closed sharply lower, while the euro plunged to a two-year low against a basket of major currencies. The euro fell to below US$1.22 and the US dollar index shot up 0.75 percent to 83.50.

Commodities tumbled along with the market, base metals all fell around 2 percent in London. Brent crude lost US97c to US$106.83/bbl while West Texas fell US$1.10 to US$91.56/bbl. Gold however, managed to rise a couple of dollars to US$1584.00/oz despite the big jump in the dollar index.

This week will bring the wider global economy into focus again, with flash estimates of manufacturing PMIs due for China on Tuesday and both the eurozone and US on Tuesday night. The influential German IFO business sentiment survey will be released on Wednesday night and the UK will provide its first estimate of June quarter GDP.

Housing will again be under the spotlight this week in the US. Tonight we have the Chicago Fed national activity index, then on Tuesday it’s the FHFA house price index along with the Richmond Fed manufacturing index and the flash PMI. On Wednesday it's new home sales, Thursday pending home sales along with durable goods, and on Friday the US will also provide a first estimate of June quarter GDP. Economists are expecting growth of 1.5%, down from 1.9% in March.

The economic calendar is on the light side this week in Australia, but what there is will be important. Today sees the June quarter PPI and Wednesday the CPI. The RBA will be watching closely given the seeming anomaly of the March quarter GDP result, which at present is holding the central bank back from further rate cuts until a clearer June quarter picture is known.

It will be busy on the local stock front this week with production report highlights from Oil Search (OSH) on Tuesday, OZ Minerals (OZL) on Wednesday and Newcrest (NCM) on Thursday, while Alesco (ALS) today and GUD Holdings (GUD) and ERA (ERA) on Thursday provide the earnings highlights.

Woolworths (WOW) will release its June quarter sales figures today and the figures for the various Wesfarmers (WES) businesses will follow on Thursday. Macquarie Group (MQG) will hold its AGM on Wednesday at which guidance is invariably updated. There has been little relief from low-volume markets for Australia's investment bank.

In the US this week earnings season will see reports from Dow components AT&T, DuPont, Boeing, Caterpillar, Ford, 3M, Exxon, Chevron, Merck and United Technologies as well as Apple, Amazon, Starbucks, ConocoPhillips and Credit Suisse.

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