Sunday, November 21, 2010

North American markets flat on Ireland and China

North American markets ended the week flat. On Friday, the S&P 500 edged 3.04 points to at 1,199.73, while the Dow gained 22.32 points to end at 11,203.55. For the week, the S&P 500 was 0.04% higher, while the Dow was up 0.1%. 

The S&P 500 has been down 2.1% in the last two weeks on Irish sovereign debt concerns and tightening in China. On Sunday, it was announced that Ireland has accepted a rescue package from the EU and IMF, though the size of the package has not been determined.

Meanwhile, China's central bank raised banks' reserve requirement ratio (RRR) by 0.5% this week, the second rise in two weeks. It was due to China's strong economic growth and high inflation. With the increase, the RRR for state-owned banks now stands at 18.5%, a record high.

Gold and other commodities fall

With tightening occurring in China, commodities headed lower this week on demand concerns. In terms of soft commodities, the price of soy beans fell 5.3% this week, while the price of rice fell 2.4%. Cotton also dropped 8% after rising 60% this year. Meanwhile, NYMEX crude fell 4% this week, while copper fell 2%. 

Gold also fell, recording its second consecutive weekly decline. Its fall was due to the strengthening US dollar, as a result of debt troubles from Ireland. For the week, gold was down 1.2% to close at US$1,352.93/ounce.

The week ahead

Even though it was announced today that Ireland has accepted a rescue package from the EU and IMF, investors can expect some worries to remain, since the details of the package still need to be determined. In addition, it is believed that the EU will have to resolve the debt issues in Portugal and Spain next. Furthermore, with a red-hot economy and inflation pressures, further tightening measures can be expected in China. Thus, investors can expect markets to head lower this week. Investors will also be keeping an eye on retail sales, as we approach American Thanksgiving and Black Friday.

No comments:

Post a Comment