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29.02.2008 - Stock Markets Weekly Brief: February goes under the surface too

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Date: 2008-02-29 16:05

If you look at the Japanese yen, you get a very good picture of mood on the stock markets at the end of February. Japanese currency is at its 3 year maximum to the US dollar reflecting high risk aversion, sparked by the combination of poor results of some financial companies (like AIG or UBS) and Ben Bernanke’s remarks of possible defaults among smaller banks. In the effect indices across Western Europe are roughly 1,5% down on the week and the US indices are likely to post a weekly loss too. That also means that the whole February brought about another dip in the stock indices, making another wave of sellout more likely.


Still, recorded falls might be considered moderate when confronted with new macroeconomic releases, especially in the US. A major drop in confidence and higher unemployment spell troubles for the future consumption, even if incomes in January were a notch higher than expected. Next week, however, we face a team of more serious releases. Payrolls and activity indices may decide on the market sentiment even for the remainder of March and securing AAA ratings for the bond insurers this time might not be enough.


Przemyslaw Kwiecien
Chief Economist