CMC Markets Weekly Report

Stocks in the U.S. closed out a volatile week with sharp gains Friday, with the Dow crossing above 13,000 for the first time since May, amid optimism that the Federal Reserve and the ECB may provide further stimulus to prop up the global economy.

Stocks spiked in midday trading following reports that the Bundesbank President and ECB chief may be in discussions on new measures to ease the eurozone's continuing debt crisis.

The Dow Jones Industrial Average soared up 253.09 points this week, or 1.97 percent, to close at 13,075.66, crossing the psychologically-important 13,000 level for the first time since early May. The S&P500 rallied 23.31 points this week, or 1.71 percent, to finish at 1,385.97 whilst the Nasdaq jumped 32.79 points this week, or 1.12 percent, to end at 2,958.09.

Stocks spiked near session highs following a report from Bloomberg that the President of the Deutsche Bundesbank Jens Weidmann is in talks with the ECB President Mario Draghi. Draghi's proposal may include rate cuts, bond purchases and new LTRO, according to the report. On Thursday, Draghi vowed to do “whatever it takes” to save the euro, which helped spark a global rally Thursday.

An ECB spokesperson wouldn't confirm nor deny the report but told CNBC that it was “normal" for Draghi to talk to other European central bank chiefs before they meet as members of the ECB governing council.

And earlier, German Chancellor Angela Merkel and French President Francois Hollande pledged to do all in their power to protect the euro after discussing the latest events in the debt crisis by telephone. European shares finished higher and the euro rallied to a session high against the dollar on the heels of the announcement.

On the economic front, consumer sentiment came in slightly better than expected in July, according to the Thomson Reuters/University of Michigan's final reading. Still, the level hit its lowest level this year.

And GDP expanded at a 1.5 percent annual rate in the second quarter, according to the Commerce Department on Friday. Still, the reading marked the weakest pace of growth since the third quarter of last year.

Traders are watching to see if the GDP report will encourage the Fed to be more aggressive at its two-day meeting next week. Some expect the Fed next week to lengthen the time frame on its forecast for extreme low rates to mid-2015, from the end of 2014.

The US dollar index fell another 0.3 percent to 82.61 as the euro rose again, and base metals all jumped 1-3 percent in London. Brent crude gained US$1.36 to US$106.62/bbl and West Texas added US74c to US$90.13/bbl.

Gold remains relatively cautious, rising US$7.80 to US$1623.60/oz. Gold had a big move on Thursday night so now it's up to the central banks to deliver. On the other hand, the Aussie has risen another 0.8% to US$1.0482.

This week will see all attention focused on anticipation of central bank action, but there will also be a wealth of global economic data releases.

Wednesday is the first of the month and that means manufacturing PMI day, with results from Australia, China, the eurozone, UK and US. Friday sees a repeat performance, with service sector PMIs. It is also jobs week in the US, with the private sector number out on Wednesday ahead of the Fed statement and non-farm payrolls thereafter on the Friday.

The US will also see the Case-Shiller house price index, the Chicago PMI, consumer confidence and personal income and spending on Tuesday. Construction spending and vehicle sales are also out on Wednesday followed by chain store sales and factory orders on Thursday.

It's a big week for data in Australia, providing plenty of scope for RBA consideration in light of whatever the central bank's global counterparts might do. Tomorrow sees building approvals, new home sales and private sector credit. Wednesday it's the PMI and a June quarter house price index, while Thursday brings the RP Data-Rismark house price index for July along with retail sales and the June trade balance. On Friday it's the services PMI.

The US earnings season will now begin its long tail conclusion over the next couple of weeks as it overlaps with the build-up of the Australian six-monthly result season, which features both half and full-year results. The resource sector quarterly reporting season will also wind up the month with a flourish today and tomorrow. On the block are the likes of Beach Energy (BPT) today and Origin Energy (ORG) and Paladin Energy (PDN) tomorrow. Navitas (NVT) will report earnings tomorrow along with Westfield Trust (WRT), and ResMed (RMD) provides the highlight for Friday.