CMC Markets Weekly Report

Stocks in the U.S ended higher for the fourth-straight session Friday, logging sharp gains for the second week, as Wall Street cheered the Federal Reserve's decision to embark on another round of monetary stimulus.

Stocks briefly cut their gains after ratings agency firm Egan-Jones lowered the sovereign debt rating of the United States to AA-minus from AA, but soon bounced back.

The Dow Jones Industrial Average closed higher for a fourth-straight session, finishing the week at 13593.37, up 53.51 or 0.40 percent whilst the S&P500 and the Nasdaq also ended in positive territory.

Stocks rallied to multi-year highs in the previous session after the Fed launched another aggressive stimulus program, saying it will buy $40 billion of mortgage debt each month and continue to purchase assets to improve the jobs market.

The US dollar was mixed against major currencies in European and US trade on Friday. The Euro rose from lows near US$1.3020 to near US$1.3170 and closed US trade near US$1.3125. The Aussie dollar fell from highs near US106.25c to lows near US105.45c and ended US trade near session lows, While the Japanese yen weakened from 77.52 yen per US dollar to JPY78.40 and ended US trade near the weakest levels.

Benchmark crude oil prices rose again on Friday as investors concluded that the Federal Reserve stimulus efforts would boost global economic activity. Brent crude rose by US78c to US$116.66 a barrel. US Nymex crude rose by US69c to US$99.00 a barrel. Over the week, Brent rose 2.1pct and Nymex rose by 2.7pct.

Base metal prices soared on the London Metals Exchange on Friday as investors embraced ��risk on�� positions - buying equities and commodities. Metals rose between 3.8-6.6 percent with tin faring best. Over the week, metals rose between 5.1-9.5 percent with aluminium under-performing. But the gold price ended only modestly higher with the December Comex gold futures price up by US60c to US$1,772.70 an ounce. Gold rose 1.9 percent over the week. The spot iron ore price rose another 5.4 percent on Friday to US$101.60 a tonne.

European shares closed sharply higher following the Fed news, but investors continued to track developments in Greece and Spain after the ECB and IMF denied that they were in negotiations with Spain for a 300 billion euro bailout.

On the economic front, consumer sentiment jumped in early September, hitting its highest levels in months, according to the Thomson Reuters/University of Michigan's index. Retail sales climbed for a second month in August, lifted by automobiles and high gasoline prices, according to the Commerce Department.

Consumer prices index logged its biggest gain in three years, according to the Labor Department. Industrial production fell in August, logging its biggest decline since March 2009, according to the Federal Reserve.

The economic calendar this week effectively kicks off on Tuesday, after the Australian share market has digested a few dozen of listed stocks going ex-dividend on Monday and Japanese markets will remain closed the whole day. On Tuesday, the ABS will release data on imports of goods and the Reserve Bank will publicly release the minutes of the Board meeting held on September 4. Reserve Bank Assistant Governor Guy Debelle will also give a speech to a luncheon in Adelaide on Monday and the Bureau of Resources and Energy Economics is expected to release its Resources and Energy Quarterly that day.

One day later, the Reserve Bank, IMF and Federal Treasury are hosting a conference titled "Structural Change and the Rise of Asia". Wednesday also includes a meeting of the Bank of Japan and we might yet see the BoJ join Draghi and Bernanke with more QE. The Minutes of the last Bank of England meeting will be released on the day as well. David Jones (DJS) is scheduled to release its FY financials.

On Thursday, David Jones' retail peers Kathmandu (KMD) and OrotonGroup (ORL) will follow suit, as well as a few other companies, including iron ore play Gindalbie (GBG). Sydney Airport (SYD) will update on August traffic stats.

The US calendar is a bit more busy with the release of the Empire State manufacturing index on Monday. On Wednesday, housing is in the spotlight with data on both housing starts and existing home sales scheduled for release. Economists expect that housing starts lifted around 2% in August to a 760,000 annual level while new home sales may have lifted around the same magnitude to a 4.55 million annual rate.

On Thursday, the usual weekly data on unemployment claims are being revealed together with the leading indicator series, the Philadelphia Fed regional survey and the "flash" reading on the manufacturing sector. The leading index is expected to have eased 0.1% in August while the "flash" performance of manufacturing index is anticipated to have eased slightly from 51.5 to 51.0 in September. Also on Thursday, "flash" readings on the health of manufacturing sectors in other regions will also be released, such as a number of European countries as well as China.

China will also release an update of property prices on Tuesday.