Weekly Overview: Jan 2 to Jan 6, 2007

Minutes of Dec. 12 meeting released on last Wednesday, showed the Fed saw more downside economic risks, triggering more concerns upon the economy and inflation.....

YT Kum, CFA 08.01.2007
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Minutes of Dec. 12 meeting released on last Wednesday, showed the Fed saw more downside economic risks, triggering more concerns upon the economy and inflation. Worse-than-expected November factory order figure further supported that worry. Although stronger-than-expected job report hinted a healthy economy, the market interpreted as a sign of no near-term rate cut and then triggered a sell-off on Friday. Tech stocks, especially Intel, lead the market last week on the expectations of better earnings. The Dow Jones Industrial Index closed at 12,398.01, down 0.52%; NASDAQ closed at 2,434.3, up 0.78%; S&P 500 lost 8.6, or 0.61%, to 1409.7. Looking forward, the December retail sales figure will be released on coming

Friday, which might tell investors more about the uncertain economy outlook.

With prices of oil, copper and gold diving, commodity market went under the spotlight last week. Unusually mild weather in Northeast US caused tumbling oil price. February crude oil future dropped substantially by 7.76% to USD56.31 per barrel; March copper future lost 11.47% to USD2.52 per lb.; February gold future lost 4.62% to USD609.3 per once, due to the strong greenback.

European markets had a weak week, tied closely with US market. Energy stocks and tech stocks are major bearish forces. Energy giants like BP and Total slid along with oil price; tech stocks like Nokia and Motorola also slumped right after the release of Motorola's profit warning. On another hand, M&A speculations, like speculation on publisher Reed Elsevier, were still on everyone's lip. Those rumors supported European markets. For the week, the London FTSE 100 edged up by 0.2 points to 6,220.1; Frankfurt Xetra DAX closed at 6,593.1, down 0.06%; Paris CAC 40 lost 0.44% to 5,517.4.

Riding on the back of China concepts, Hong Kong stock market continued its rally on last Tuesday and Wednesday, but profit-taking pressure pushed major gauge back to 20,211.3, up 1.23% for the week, after refreshing the historical high at 20,554. Shanghai A-share market continued it bullish run on first dealing date after New Year. However, the run was stopped by profit-taking actions and some new extensions of austerity control. In order to absorb excess liquidity in the market, PRC government issued 1-year Treasury bill worth RMB 80bn to major banks on last Thursday and further raised the required reserve ratio by 50 bp to 9.5% on last Friday. Those actions impacted banking sector most as loan growth is expected to decline. Shanghai A-share index dropped 36.7, or 1.3%, to 2,778.5 last week.

Taiwan Tech companies, which are heavily weighted in the index, are still the best performers last week. However, any strength in China stock market didn't help China-related stocks in Taiwan, curbing the index's upside. The TWSE added 11.9, or 0.15%, to 7,835.6. Singapore Straits Times Index rose 1.45% to 3,029.0. The New Year Eve bomb last week in Thailand highlighted its country risk, discouraging money inflows. SET Index slumped 7.6% to 628.2.

Bumpy YEN fluctuations and export stocks' performances drove Japan stock market to hit an eight-month high on last Thursday but market plummeted on last Friday due to profit-taking. The NIKKEI 225 registered a positive gain of 0.78% last week to 17,091.6. Japan Central Bank will hold meeting on Jan 17 when market expects a possible interest increase.

As for the currency, the dollar was quoted at 118.6250 Yen and the Euro was $1.3003. British pound was quoted at $1.9292 and Aussie, $0.7788.

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About Author

YT Kum, CFA  YT Kum is a consultant for Morningstar, contributing to manager selection and asset allocation activities in Asia, and is responsible for providing investment thought leadership on topics relevent to investors in Asia.  

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