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Global Equity Markets Rallying Changed to High Volatility

November 27, 2009

Global markets: Weekly overview

The week began on a rather positive note, global equity markets rallying on Monday, underpinned by strong oil and gold prices. The rest of the week was very volatile: oil tumbled, Asian markets headed south on concerns over the banking sector, and the news about Dubai World’s debt rescheduling caused a sharp sell-off on Thursday and Friday. Stocks and commodities dropped, treasuries jumped and credit default swaps climbed.

U.S. stocks rallied on Monday as U.S. home sales increased more than expected, rising 10% in October to the highest level since February 2007. The markets traded sideways on Tuesday and Wednesday. The U.S. markets were closed on Thursday due to the Thanksgiving holiday, and this was the day that Dubai World decided to delay repayment of its debt. Hence, when the U.S. equity markets reopened on Friday, they underwent a sharp fall.

Markets in Asia spent most of the week in negative territory and lost 5-6% w-o-w. Emerging concerns over the Japanese and Chinese banking systems need to boost capital spread across the market. This was compounded on Thursday by the Dubai World debt rescheduling news, which triggered fears of a massive default and substantial declines at banks and companies exposed to Dubai debt.

The Russian equity market was trading in positive territory only on Monday. Declining oil and metals prices caused the market to fall further on Tuesday, and comments from Finance Minister Alexei Kudrin that market was “overheated” pushed stocks even lower on Wednesday. On Thursday and Friday, the local market slumped with global markets. Oil dived below $74/bbl on Friday and the dollar hit a fresh 14-year low against the yen at less than JPY85/USD1. The RTS and MICEX indexes lost 6-7% w-o-w.

Source: Troika Dialog


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