It was a volatile week, with traders selling out of positions on Wednesday ahead of the Thanksgiving holiday on Thursday. Once again it was financial stocks that came under pressure. Goldman Sachs downgraded Citigroup to a sell, expecting $15 billion more in write downs.
A University of Michigan poll indicated that consumer confidence is at its lowest level in two years. The index was 76.1 in November, down from 80.9 in October.
Major home and building supply retailer Lowes reported a third-quarter profit fall of 10% and cut full year forecasts due to the negative effect the US housing slump is having on sales.
The federal election is the focus in Australia, though the change of government that many predict will occur is unlikely to have a substantial impact on financial markets as the Labour and Liberal Parties have similar economic policies.
BHP Billiton faced backlash from its Chinese customers on its proposed merger with Rio Tinto. A successful merger would reduce China’s major iron ore suppliers from three to two.
A bear market is commonly defined as more than a 20% fall from the peak in a 12-month period. Japan is the first of the 20 largest markets to qualify, with the TOPIX index down 21% Wednesday from its 2007 peak.
The Japanese markets were closed for the Thanksgiving holiday on Friday.
The UK has yet to fully recover from the Northern Rock debacle, but this week the focus was on more immediate matters as investors scrambled to change their banking passwords. The British government lost the personal banking details for 25 million people through its internal mail system.
Business investment in the UK was relatively unchanged in the third quarter and was up 4.6% from a year earlier.
There are signs that problems in the credit markets have spread to insurance companies. Swiss Reinsurance, the world’s largest reinsurance company, saw a sharp downturn in share price after recording substantial losses linked to exposure to the deteriorating bond markets.
It was a quiet week on financial markets as the US was closed on Thursday for Thanksgiving. In a sign of the nervous times, US investors sold out of stocks ahead of the US thanksgiving holiday. Asian markets were also subdued with Japan closed on Friday.
Positive news was in short supply this week. The US remains the only major economy considering an interest rate cut. Other major economies have indicated that they will raise rates or keep them as is.
Australians will vote in the federal election Saturday. The result is not expected to impact the markets as the parties have similar economic policies.
Head of Fundamental Analysis
HUBB Financial Group