Weekly Market Monitor

Despite the much-heralded arrival of Facebook on the Nasdaq last week, US and European stockmarkets recorded their worst weekly performances of 2012 amid growing concerns about the impact of a potential Greek exit from the eurozone. In the US, the S&P 500 fell 4.3% while the MSCI Europe was down 5.1%. Asian markets fared no better, with the MSCI Asia Pacific Ex Japan index falling 4.8% over the week.

Much of the focus was on banks after reports of substantial withdrawals from Greece’s banks following the country’s inconclusive election result. Spain’s banks were also in the spotlight following the downgrade of 16 of the country’s lenders by Moody’s Investor Service.

It was not just equity markets that endured a dismal week, commodities and the euro also suffered. Brent crude fell nearly $5 to below the $108-a-barrel mark, while gold was at one point trading 20% below the record high it reached in September 2011, before rallying strongly towards the end of the week.

In currencies, the euro hit a 2012 low versus the dollar at $1.27. The dollar benefited from investors’ flight to quality and reached a four month high against a basket of currencies.

With risk aversion heightened by continued eurozone concerns, the yield on US treasuries, UK gilts and German bunds continued to fall. The ten year bund yield fell to below 1.4% at one point, while the equivalent US treasury yield fell 12 basis points to 1.72% and the ten year UK gilt was down 14bps to 1.82%.

It was a different story for peripheral eurozone bonds, however, with the yields on Spanish and Italian bonds soaring. The Italian 10 year bond yield rose by around 31bps overall to end the week at 5.82%.

Equity market returns last week:

Source: Datastream

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