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VIDEOMarkets Unsettled Amid Greek Saga
By
Prieur du Plessis
Mar 01, 2010 8:00 am
As Greece goes, so goes the US?
As investors vacillated about the impact of developments in Greece, together with the uncertainty of strong fourth-quarter economic data possibly not carrying over to the first quarter, stock markets experienced two sharp sell-offs and two rebound rallies, limping to small gains on Friday but ending the week modestly down.
Renewed fears over Greece’s debt woes, disappointing German business confidence statistics, and lower-than-expected US consumer confidence data tempered investor optimism for risky assets, triggering haven demand for government bonds and the Japanese yen.
Fed Chairman Ben Bernanke provided some support for stock markets on Wednesday by indicating in his testimony to the US House Financial Services Committee that the Fed fund rate will remain at exceptionally low levels for an extended period. However, the flip side of the coin is his gloomy picture of the economy still battling high unemployment and a weak housing sector.
“Greece hasn't gotten so much press since 146 BC when the Romans took over,” said Paul Kasriel (Northern Trust). In news after the close of the markets, the Financial Times reported: “Germany’s biggest banks are looking at a rescue plan for Greece under which they would buy Greek debt backed by financial guarantees from Berlin. One senior German bank official said serious thought was being given to a plan for the German government, working through KfW, its development bank, to issue guarantees to banks that bought Greek debt.”
The past week’s performance of the major asset classes is summarized in the chart below -- a set of numbers indicating that a degree of risk aversion has crept back into financial markets. Interestingly, unlike equities, both investment-grade and high-yield corporate bonds ended the week in the black. “We believe investors can capture attractive yields and excess spread in the high-yield market with relatively low default risk,” Andrew Jessop, high-yield portfolio manager at Pimco, said in a note on the company's website (via MoneyNews).
A summary of the movements of major global stock markets for the past week and various other measurement periods is given in the table below.
It was essentially a flat week, with the MSCI World Index declining by 0.1%, but the MSCI Emerging Markets Index managing to eke out a positive return of 0.3%. With the Chinese returning from the lunar holiday, Hong Kong (+3.6%) put in one of the better performances among important markets, whereas mainland China (+1.1%) also closed the week in the black.
Notwithstanding the huge rally since the March lows, only the Chile Stock Market General Index has been able to reclaim its 2007 pre-crisis peak and is now trading 9.4% higher. Mexico could be the next country to eliminate the bear market losses.
Top performers among stock markets this week were Ukraine (+4.5%), Greece (+3.7%), Hong Kong (+3.6%), Cyprus (+3.2%), and Thailand (+3.0%). At the bottom end of the performance rankings, countries included Turkey ( 6.8%), Malta (-5.7%), Austria (-5.2%), Argentina (-4.9%), and Latvia (-4.2%). Turkey suffered from tensions between the government and the military. Debt-ridden European countries such as Italy (-3.2%), Spain (-3.2%), Ireland (-3.2%), and Portugal (-2.1%) featured strongly at the bottom end of the performance ranking.
Of the 96 stock markets I keep on my radar screen, 33% recorded gains, 60% showed losses, and 7% remained unchanged. The performance map below tells the past week’s somewhat bearish story.
Emerginvest World Markets Heat Map
Renewed fears over Greece’s debt woes, disappointing German business confidence statistics, and lower-than-expected US consumer confidence data tempered investor optimism for risky assets, triggering haven demand for government bonds and the Japanese yen.
Fed Chairman Ben Bernanke provided some support for stock markets on Wednesday by indicating in his testimony to the US House Financial Services Committee that the Fed fund rate will remain at exceptionally low levels for an extended period. However, the flip side of the coin is his gloomy picture of the economy still battling high unemployment and a weak housing sector.“Greece hasn't gotten so much press since 146 BC when the Romans took over,” said Paul Kasriel (Northern Trust). In news after the close of the markets, the Financial Times reported: “Germany’s biggest banks are looking at a rescue plan for Greece under which they would buy Greek debt backed by financial guarantees from Berlin. One senior German bank official said serious thought was being given to a plan for the German government, working through KfW, its development bank, to issue guarantees to banks that bought Greek debt.”
The past week’s performance of the major asset classes is summarized in the chart below -- a set of numbers indicating that a degree of risk aversion has crept back into financial markets. Interestingly, unlike equities, both investment-grade and high-yield corporate bonds ended the week in the black. “We believe investors can capture attractive yields and excess spread in the high-yield market with relatively low default risk,” Andrew Jessop, high-yield portfolio manager at Pimco, said in a note on the company's website (via MoneyNews).
A summary of the movements of major global stock markets for the past week and various other measurement periods is given in the table below.
It was essentially a flat week, with the MSCI World Index declining by 0.1%, but the MSCI Emerging Markets Index managing to eke out a positive return of 0.3%. With the Chinese returning from the lunar holiday, Hong Kong (+3.6%) put in one of the better performances among important markets, whereas mainland China (+1.1%) also closed the week in the black.
Notwithstanding the huge rally since the March lows, only the Chile Stock Market General Index has been able to reclaim its 2007 pre-crisis peak and is now trading 9.4% higher. Mexico could be the next country to eliminate the bear market losses.
Top performers among stock markets this week were Ukraine (+4.5%), Greece (+3.7%), Hong Kong (+3.6%), Cyprus (+3.2%), and Thailand (+3.0%). At the bottom end of the performance rankings, countries included Turkey ( 6.8%), Malta (-5.7%), Austria (-5.2%), Argentina (-4.9%), and Latvia (-4.2%). Turkey suffered from tensions between the government and the military. Debt-ridden European countries such as Italy (-3.2%), Spain (-3.2%), Ireland (-3.2%), and Portugal (-2.1%) featured strongly at the bottom end of the performance ranking.
Of the 96 stock markets I keep on my radar screen, 33% recorded gains, 60% showed losses, and 7% remained unchanged. The performance map below tells the past week’s somewhat bearish story.
Emerginvest World Markets Heat Map
No positions in stocks mentioned.
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