Global markets: Weekly overview

16 January 2009

The negative performance of global markets that began in the first trading week of 2009 has continued. The major US indexes lost 4-5% w-o-w on Friday. US stocks slid to a six-week low after a government report indicated that retail sales have decreased at more than double the rate expected by economists.

European and Asian equities declined for most of the week as well, dragged down by negative news outflow from the US. Thursday was the seventh day of decline on European exchanges, as concerns that financial firms will need to raise more capital sent bank shares to a 12-year low. Asian stocks tumbled to a five-week low on Thursday after Japanese machinery orders and US retail sales statistics fell at twice the rate that was expected.

Friday was the only day of rebound on global stock markets. The MSCI World Index rose for the first time in eight days after the US government agreed to invest $20bn more in the Bank of America and guarantee of a further $118bn of potential losses on toxic assets, as well as due to growing speculation that China will pass another stimulus package.

Crude posted the biggest weekly decline in a month after OPEC announced that demand will drop this year amid a global recession. The cartel said that it expected world demand for crude to fall by 180,000 bpd in 2009, or 30,000 bpd greater than the decline the group had predicted in its previous forecast.

The Russian equity market was influenced by external news flow and further ruble devaluation. Both the euro and dollar exchange rates have reached all-time highs against the ruble. The Central Bank has broadened the ruble’s exchange rate fluctuations against the bi-currency basket five times in six trading days. The Russian currency lost more than 6% against the bi-currency basket during the first trading week of 2009. The MICEX closed the week slightly higher than where it ended 2008, whereas the RTS Index is close to its October 2008 lows due to the weakening of the national currency.

Source: Troika Dialog

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