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Market Round Up: October 10 - 14, 2011

Market Round Up: October 10 - 14, 2011

Domestic Markets: Stocks exploded on the upside Monday, October 11th, and remained up, with the DJIA closing 3% higher, the S&P up 3.4%. The S&P even closed past the 50 day moving average, which is a signal to technical analysts that a bull market may be beginning. Technical analysts forecast based on past market behaviour, relying heavily on charts (pricing and volume, especially).  Some analysts suggest a rally may result from “deeply oversold” markets, as “investors are reacting to even neutral signs of hope the European debt situation will be solved.”[1] The TSX was closed on Monday for the Thanksgiving Holiday. The TSX had a similar rebound on Tuesday as American indexes had Monday, closing up 2.5%. Unfortunately, American indexes did not continue to rise, with the Dow down 0.2%, and S&P up less than a single point.  On Wednesday, after the European Commission released recapitalization plans for European banks, markets were driven higher. High enough, in fact, that the Dow made it into positive territory for the first time in two months. The DJIA ended higher 0.9%, the S&P closed up 1%, and the TSX closed up 1.3%. Jobless claims had an effect on markets Thursday, with the Dow closing down 0.4%, the S&P down 0.3%, and the TSX down 1%.

Global Markets: Early last week, the ECB raised an alarm regarding the use of bondholders in Euro Zone bailouts, suggesting that using private bondholders to accept losses on Euro Zone sovereign debt could damage the Euro’s reputation.[2] This resulted in a Euro pull back from a one-month high against the U.S. dollar. On Friday, October 14th, however, the Euro rose as high as $1.3828 against the dollar in optimism ahead of the meeting of G20 finance ministers on November 11th and 12th.[3] The G20 meeting in Paris is focusing on (1) Greece and (2) Euro Zone funding issues. According to reports, finance ministers from the BRICS nations - Brazil, Russia, India, China and South Africa - will use the G20 meeting to push the IMF to give more funds to tackle the Euro Zone crisis.[4] There are three main options under review, including increasing membership dues to increase the lending pool, making a special resource pool (called the New Arrangements to Borrow), and having emerging markets pool loans in a special purpose lending vehicle and offer credit to certain countries.[5]

General Comments:  Some Commentators are suggesting it is time to reinvest in commodities, such as oil. According to the EIA, growing demand for oil and gas in non-OECD countries should keep demand high, even with waning needs in developed countries.[6] However, if you remember last week, this may not be quite so clear-cut in all situations. According to the Financial Times, Canadian commodities in particular are desired, because of low political risk.[7]