Trading Week: November 28 – December 2
Global central banks finally acted, when the European debt crisis seemed to cross the line for the worse. On Wednesday, 21 November 2011, the Federal Reserve, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank (ECB) and the Swiss National Bank jointly announced that they will provide US dollars to banks in Europe and elsewhere at low interest rates. The People’s Bank of China also announced to lower the reserve-requirement ratio by 50 basis points on the same day.
These actions had caused the global markets to rally. The Singapore benchmark FSSTI rose 129.43 points or 4.9 per cent during the week to close at 2,773.36, reversing four straight weeks of declines. The Hong Kong Hang Seng Index followed similar trend and increased at a higher rate of 7.6 per cent or 1,350.91 points to close at 19,040.39. The Dow also reversed its two consecutive weeks of declines to close 787.64 points or 7 per cent higher to finish at 12,019.42. Despite the boost in sentiments, investors remained cautious. Daily average turnover value remained relatively unchanged at just over S$1 billion.
Outlook for Trading Week: December 5 – 9
As we have always claimed, politicians act faster during times of crisis, although this round of action came from the central bankers. Prior to the central banks’ actions, global markets had dropped for several weeks, and most important of all, Standard and Poor’s had just downgraded major banks in Europe and the US a day earlier.
We think this was the trigger point for action. If our guess is correct, the European debt crisis has deteriorated to the level that immediate and effective actions were needed. Thus, more bold actions could emerge from this coming European summit on Friday, 9 December 2011. Any signs of ECB’s involvement in the next action plan will be very positive to the market. Although plans without ECB’s involvement could still be positive to the market, it could be
