In the past week, investors had their hopes pumped up and then punctured by the words of the president of the European Central Bank, Mario Draghi.
Leading up to Thursday's ECB policy meeting, Mr Draghi had raised expectations by pledging to do whatever it takes to keep the euro from splintering. His comments inspired a rally on the local market that, by Tuesday, had surged 3.5 per cent.
By yesterday, however, a chunk of those gains had been erased after Europe's central bankers failed to deliver the expected "shock and awe". Instead, they chose to keep rates on hold, and Mr Draghi appeared simply to reiterate his earlier stance.
As a consequence, Europe's market dropped 3 per cent, US stocks shed 0.7 per cent, and Australia's market was dragged down with them, falling 1.1 per cent yesterday.
For the week, the benchmark S&P/ASX200 Index rose 11.8 points, or 0.3 per cent, to close at 4221.5.
What's next for Europe? Analysts say things are likely to follow a predictable course: there will be renewed action in troubled "periphery" bond markets - particularly Spanish and Italian bond markets - as traders test the resolve of Europe's governments and the ECB's commitment to keeping the euro together. So, expect the rollercoaster to continue.
But Westpac's chief currency strategist, Robert Rennie, says the latest developments in Europe are better than investors realise.
He sent a note to clients yesterday explaining why. Since Mr Draghi's first meeting as the ECB president late last year, he has cut the bank's interest rate by 0.25 percentage points he has announced two 36-month, long-term refinancing operations he has cut the collateral requirements for Europe's banks and cut their reserve ratio from 2 per cent to 1 per cent he has cut the deposit rate to zero (something the US Fed has not dared do) and, on Thursday, he took some "notable steps towards proper quantitative easing", one of which opened the possibility that the ECB may relinquish its seniority status in future bond buying programs.
"Overall, there was probably enough [from the ECB meeting] to reduce the risk of a eurogeddon but not enough to satisfy buyers of risky assets," Rennie wrote, explaining the market's reaction yesterday.
"[But] with the fullness of time, markets will come to understand that there are deep and meaningful developments afoot at the ECB."
Watch this space, then.
Locally for the week, Telstra was up 6?, at $4.02, hitting $4 for the first time in four years, as the telco started to benefit from its recent involvement with the national broadband network and growth in its mobile and broadband businesses.
BHP Billiton fell 12?, to $31.30, after it said it had to write down the value of its American shale gas assets by $US2.84 billion ($2.73 billion). Rio Tinto gained 1?, at $52.01, after it said it would soon start cutting office jobs in Melbourne and Sydney to deal with falling commodity prices and soaring costs. CSL dropped $1.98, to $40.28, after the head of the blood products and vaccines maker said he would leave the company next year, after 23 years in the job.
Consolidated Media Holdings rose 5? to $3.44 after News Limited moved a step closer to gaining what analysts said would be high-earning pay TV assets, winning regulatory approval for its acquisition of Consolidated Media.
ALL ORDS AUSTRALIA
JUL 30 TO AUGUST 03