What a bizarre week. Bizarre is not a word I use that often but I’m struggling to find the right description for a week where higher futures lead to lower closes, and lower futures result in market rallies.
The upward trend continued this past week thanks mostly to a U.S. Federal Reserve (Fed) that put interest rate increases further off into the future.
North American markets started off 2012 on a positive note in this 4-day shortened week when traders returned to work on Tuesday thanks to some better than expected economic data out of the U.S. and China.
Any thoughts of a Santa Claus rally going into the holiday season quickly faded this week for the TSX Index as investors witnessed four successive days of losses. While the TSX Index did manage to post a gain on Friday, it was little consolation for a market that was down over 3% by the time the week finished.
It was a slow week for equity markets, but that really comes as no surprise as U.S. markets were closed on Thursday for the Thanksgiving holiday. While they did reopen for part of Friday, volumes remained low and there was a small burst of enthusiasm in the morning as it appeared Black Friday retail sales could be strong this year. However, the overhang of the European debt crisis continued to weigh heavily on equity markets worldwide.
Sometimes I think I’ve seen everything when it comes to the markets, but Greece has proven otherwise. We always knew that the debt deal reached in Europe last weekend was fragile since any of the 17 countries in the monetary union could easily scuttle it.
For the most part, from a macroeconomic perspective, this week was "more of the same" as investors continued to deal with the ongoing economic uncertainty caused by the ongoing debt problems in Europe. However, there were some economic statistics that were better than expected, but investors remained conservative looking for more positive results in the future before changing their perception of the global economy.
While this week brought us some influential manufacturing and employment data out of the U.S., the driver of the capital markets continued to be Europe. The week had a dreadful start as fears continued to escalate that European governments were ill prepared to deal with the potential fallout from a sovereign debt default, namely Greece.
While this week had five days to it, investors will only remember what happened during the second half of the week as a number of different markets came under considerable selling pressure.
While the trading week had five days, it was really only Friday to which investors were looking forward. Indeed, the U.S. Labour Department released its monthly employment report showing that absolutely no jobs were gained or lost in the month of August, even after Wednesday’s ADP report suggested that 91,000 private jobs had been created.