Sunday, June 13, 2010

Stock markets poised to move higher this week

After a flash crash, a correction and weeks of worrying over Europe, it appears that stock markets are poised to finally head higher in the coming week.

The Dow rose 2.8% this week, which is its biggest weekly rise in 3 months. As for the biggest factor determining movement in markets, Spain, the country successfully sold $3.9 billion of bonds on Thursday, leading European markets to rise for the third week in a row. In addition, major Spanish bank Banco Santander SA has seen its shares rise 14% this week.

In another sign of receding fears, the volatility index VIX fell 5.8 percent to settle at 28.79, its lowest level since May 13. The index has fallen about 28% since a few weeks earlier when Europe fears sent the index to 40.

However, all was not rosy. On Friday morning, the U.S. Commerce Department reported that U.S. retailers' sales unexpectedly fell in May for the first time in eight months. Retailers' sales fell 1.2%, which was worse than economists' estimate of a 0.2% rise. However, this bad news was off-set later in the day by a jump in a consumer sentiment index to a near two-and-a-half-year high. The University of Michigan Surveys of Consumers showed that consumer sentiment in June was 75.5, which was higher than expectations of 74.5.

Therefore, with the positive developments in the European (particular Spanish) and U.S. stock markets, and the receding fear as illustrated by the VIX, stock markets appear poised to head higher in the coming week.

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