Will the Stock Markets Break the Four-week Losing Streak?

By: Regent_Markets

Last week, major stock markets marked their fourth losing week in a row. The Dow fell 6.2% on the week while the S&P 500 fell 7%. Both major indices have now fallen 24% in 2009 alone, with the S&P 500 hitting its lowest level since September 1996. Gold closed the week unchanged after a volatile week that saw it dip below $900 briefly. Oil managed to gain slightly, holding above the $45 marker.

Very few sectors kept their heads above water, even the supposed safe haven of
gold failed to make any progress last week, finishing largely unchanged in
volatile trading. Banks were once again at the forefront of the selling.
Lloyds group hit headlines over the weekend after the government took
majority control. After a week of arguments over the terms an asset insurance
scheme with the government, the only option available was for the government
to take a majority stake.

The problems largely stem from the HBOS divisions
which Lloyds chief Daniels admitted to doing less than the usual amount of
due diligence on before the takeover. Lloyds wasn't the only UK bank to hit
the headlines though, with HSBC crashing to its lowest level since 1998. A
few weeks ago, Morgan Stanley analyst Michael Helsby first mooted the idea of
a HSBC needing a massive cash injection. At the time he was criticised and
met by a strong rebuttal from HSBC.

Barclays were hit hard in particular on speculation that they may have to
millions back to the Lehman brothers liquidator. Aviva's dire performance has
also hit financials hard with Royal & Sun Alliance and Standard Life also
taking a hit on the day.

On Tuesday, Bernanke's testimony caused further volatility after he revealed
that more than the allocated $700bn will be needed to fix the banks.
Investors weren't be entirely surprised by this, but it was hardly fuel for
rampant buying. The bailouts, rescue packages and rights issues seem to
follow a similar pattern of denial, speculation and then further cash
injections. It is little wonder that investors have lost their patience with
stock markets. Bernanke has said that financial stability must come first
before any recovery. The chairman of the federal reserve is also thought to
be against nationalising US banks, but if the economic slump continues, this
may be the only option left to secure financial stability. In a potentially
significant speech, Kansas City Fed President Thomas Hoenig called for the
nationalisation of all insolvent banks on Friday.

The ECB and MPC cut rates by 0.5% as expected, though the euro has been
volatile following Trichet's press conference which seemed to imply that
there were further cuts to come. The Central Bank of Australia surprised
everyone by keeping rates on hold and then announcing it was sliding into a
deep recession just a few days later.

On Friday, the US Non Farm Payroll report was almost an afterthought following
an already volatile week. Unemployment rose to 8.1%, bringing the total
recession job-losses to four million. Markets took a dive on the news, but
the Dow Jones managed to close the day higher.

Next week's economic highlights include Bernanke speaking on Tuesday and the
Royal Bank of New Zealand setting rates on Wednesday. Thursday brings US
retail sales, while Friday sees the release of US consumer sentiment figures.

The weekend's government bailout of Lloyd's group could put more pressure on
the pound this week. A One Touch trade predicting that GBP/ USD will hit
1.3893 during the next 5 days could return 67%. This move may already have
happened by the time markets open on Monday, but there could be pullbacks
that allow for re-entry.

By Mike Wright
Tel: +448003762737
Email: editor@my.regentmarkets.com
Url: Betonmarkets.com & Betonmarkets.co.uk

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