It was an interesting week on the stock markets. Attention of investors was focused on Wednesday’s FOMC interest decision. To no surprise to the market, the Fed cut the federal funds rate by 50 basis points to 3.00% and the discount rate by the same amount to 3.50%. Those were good news for the equities markets. Stocks gained despite worse than expected first reading of the U.S GDP for the fourth quarter. According to it, the American economy grew only by 0.6% against the forecasted 1.2%. Also Friday’s Nonfarm Payrolls publication was not optimistic. The reading showed a decline of 17K while analysts expected a 65K gain.

Obviously what gave markets a push was the interest rate cut by the Fed. American indices continued their rebound gaining around 3.00% throughout the course of the week. The Dow Jones Industrial Average climbed from 12,270 to 12,720 (till Friday afternoon) while the S&P 500 gained from 1,341 to 1,390 (Friday). That was the signal global indices were waiting for. Asian indices rebounded with the Japanese Nikkei 225 climbing from 13,125 to 13,488. European indices also gained on decreasing risk aversion. The German DAX increased from 6,684 to 6,978 and the French CAC 40 gained from 4,780 to 4,964.

Polish investors were also in better moods. The Warsaw Stock Exchange’s index, the WIG, broke back the 3,000 points barrier. It started the week at 2,912 to finish at 3,060. The gain could have been higher if not the interest rate hike by the Polish MPC by 25 bp. to 5.25%.

Is this the sign for better times? Hard to say. We are still awaiting for the yearly reports by banks which experienced huge losses on the subprime market. The time between march and april will be crucial.

Adam Narczewski