11 July 2009 - Global Markets Review

Dear Ladies and Gentlemen,

An idiom this week to start things off:

'Pot Calling The Kettle Black'

China has accused an Australian Rio Tinto executive of bribing staff from Chinese steel companies during iron ore negotiations this year, according to the Australian foreign ministry.

"As understood from a Shanghai State Security Bureau, during China's iron ore negotiations with foreign miners in 2009, Stern Hu gathered and stole state secrets from China via illegal means including bribing internal staff of Chinese steel companies," Stephen Smith, Australian foreign minister said, citing a statement posted on an official Chinese web site.

Mr Smith said China's national security authority was conducting a criminal investigation of Mr Hu, the Australian detainee, and three of his Chinese co-workers.

The four men, all from Rio's iron ore trading team, have been detained since the weekend. The Chinese Ministry of Foreign Affairs on Thursday said that authorities had obtained evidence which proves they stole - for a foreign country - Chinese state secrets, which hurt China's economic interests and economic security.

Rio Tinto said in a statement on Friday that it was "surprised and concerned" by the accusations that four of its staff in China have been involved in bribery.

"Rio Tinto is following developments very closely," it added.

"As the company has said in earlier statements, we are not aware of any evidence that would support these allegations."

..... apart from empty brown envelopes and KTV receipts to name but a few perhaps?

On to the 'Real World' now.

As predicted in my Newsletter last weekend, this week was relatively flat/negative and the fireworks are coming next week with over 150 companies due to announce their earnings.

Here in China, exports fell for an eighth month as the global recession cut demand, highlighting the economy's dependence on stimulus measures to boost growth.

Overseas sales dropped 21.4% in June from a year earlier, the state-run Xinhua News Agency reported, citing customs data. That compares with the median estimate of a 21% decline in a survey of 19 economists and a record 26.4% drop in May.

China, the world's second-biggest exporter, has stalled gains by the RMB against the Dollar, increased export-tax rebates and boosted trade finance to help exporters. Economic growth will top the government's 8% target for the year as lending and investment surge under a 4 trillion RMB ($585 billion) stimulus plan, according to Goldman Sachs and BNP Paribas.

Exports rose 7.5% from the previous month, Xinhua said. Imports dropped 13.2% from a year earlier, the news agency said, after a 25.2% fall in May.

Talking of China, this week was more about the G8 and how China cropped up as a focal point more often than not.

Leaders of developing countries confronted advanced nations with a demand for a greater role in the management of the global economy, signalling the drift in power away from the financially distressed West.

Five countries with almost half the world's population - China, India, Brazil, Mexico and South Africa - challenged the hegemony of the US Dollar, balked at the industrial world's strategy for fighting climate change and sought more clout in global markets and institutions.

The encounter Thursday in L'Aquila, Italy at the annual Group of Eight summit dramatized the ascendance of emerging nations - led by China - as the worst economic calamity since World War II batters the US and its European allies.

"Everyone was of the opinion that the G-8 isn't any longer the most ideal structure for dealing with the governance of the world economy," Italian Prime Minister Silvio Berlusconi told reporters after chairing the session.

Leaders of the G-5 - representing 3 billion people with gross domestic product of $7 trillion - appeared as a united front for a fifth time at the summit of the G-8, the advanced world's forum founded in 1975.

"What is happening here is simply the acknowledgment of a reality," Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, said in a Bloomberg Television interview. "Be it the fight against poverty, climate change, trade - whatever you want that is global in nature - you need those large emerging economies."

The eight - the US, Japan, Germany, Britain, France, Italy and Canada, along with Russia, a member since 1998 - unite 880 million people with combined GDP of $32 trillion.

Russia, which has joined Brazil, India and China in the BRIC bloc, views the G-8 as a forum for "brainstorming," said Sergei Prikhodko, an aide to President Dmitry Medvedev. "It's too early to talk about burying the G-8."

The G-5 took aim at the advanced economies' call for a 50% cut in greenhouse-gas emissions by 2050, saying the policy would suppress the economic growth needed to lift millions out of poverty. No target can be set until world climate talks wrap up in December, they said, insisting on money and technology to help clean up the atmosphere.

"While we don't expect to solve this problem in one meeting or one summit, I believe we've made some important strides," President Barack Obama said.

The contrast was highlighted July 7 when the International Monetary Fund said developing countries are leading the way out of the economic morass spawned by the industrial world.

Emerging economies led by China will expand 4.7% next year, the IMF said, up from an April prediction of 4%. The Washington-based lender forecast growth of 0.6% in the advanced economies, up from expectations of stagnation.

China is "better situated to deal with this crisis," billionaire investor George Soros said in a Radio interview July Tuesday. "The Chinese in my opinion are going to gain in power and influence in a way that people currently don't recognize."

In a statement in L'Aquila, the G-5 warned the industrial world against backsliding on aid commitments and sought "a new global governance," including better representation in the IMF and United Nations.

After parallel summits Wednesday in a region rebuilding from an earthquake in April, the G-8 and G-5 met Thursday to work out a statement to at least paper over the diverging worldviews.

Central to their dispute is the status of the Dollar, its role as the world's dominant reserve currency under threat from the $2.3 trillion in debt run up by the US since the start of 2008 to stem the financial crisis.

The G-5 - mainly China - held around $1 trillion in US Treasury debt in April, giving them leverage over decisions made in Washington.

While officials from China, Russia, India and Brazil grumbled outside the conference room about the Dollar's hegemony, there was "not a serious discussion" of currencies on the inside, UK. Prime Minister Gordon Brown said (more on that later).

So with very little happening, could this be the 'calm before the storm' I wonder?

On to those numbers for the week:

US Markets

How the US did this week .....

US stocks looked closed the week at levels not seen since the beginning of May as a month of losses took its toll.

Energy companies have dominated trade throughout the week as the price of oil crashed through the $60 mark, down 10% since last week and more than 16% from its recent highs.

This proved a drag on energy stocks, which once again led the selling on Friday after Chevron said its second-quarter earnings might fall short of estimates. The company said a weak Dollar counteracted the effect of the oil price rise during the quarter, and its shares fell 2.7% to $61.40. Other energy producers were also hit. Exxon-Mobil dropped 1.3% to $65.12 and ConocoPhillips lost 1.5% to $39.72.

The benchmark S&P 500 index finished the session down 0.4% at 879.13, while the Dow Jones Industrial Average lost 0.5% to 8,146.52. But the Nasdaq Composite index rose 0.2% on strength in technology stocks to 1,756.03.

That left all three down between 1.6 and 2.3% for the week, the fourth straight decline.

Investors continued to worry about the state of the US consumer, with low domestic demand contributing to falling retail sales numbers on Wednesday and a narrower-than-expected trade gap on Friday. A lower consumer confidence number suggested that the trend was likely to continue at least for the near term.

The lack of demand for US goods also spurred talk of a possible second stimulus plan during the week, as politicians and political advisers gave conflicting messages over whether one was likely to be passed.

Investors were split between those who saw such talk as a bearish sign on the economy and those who believed its eventual implementation would provide a boost for equities.

But even as earnings season kicked off with a better-than-expected number from Alcoa, caution reigned and the markets continued to slide, making it almost a case of earnings versus the economy.

Banks enjoyed a positive session on Thursday, but lost ground on Friday morning as reports said several Wall Street firms are complaining the government is demanding too high a price for the warrants they hold as part of the financial bail-out earlier this year.

The Wall Street Journal said JPMorgan has waived its right to buy back the warrants and will let them be sold on the open market instead.

JPMorgan's shares lost 3.8% to $32.34, while Citigroup fell 3.7% to $2.59 and Bank of America declined 0.8% to $11.88. Elsewhere in the financial sector, shares in Progressive, the car insurer, fell 0.8% to $14.32 as it reported a smaller quarterly profit than expected, even though revenues rose on stronger policy sales and better performing investments.

Meanwhile CIT Group, the commercial lender, plunged 17.7% to $1.53 after Bloomberg reported the Federal Deposit Insurance Corporation is unwilling to guarantee its debt.

In the technology sector, Yahoo gained 2.6% to $14.93 after an analyst at broker Thomas Weisel upgraded the search engine company's shares on growing confidence in its new management structure.

Meanwhile, Goldman Sachs downgraded shares in IBM, saying the stock's recent outperformance of the rest of the sector would not continue in spite of an upturn in demand. IBM lost 1.2% to $100.83.

European Markets

What has been happening in Europe this week .....

European bourses ended their fourth consecutive week in the red on Friday, as confidence waned ahead of second-quarter results announcements.

There was a broad shift into defensives, with retailers and goods producers benefiting.

The FTSE Eurofirst 300 fell 1.1% to 814.29 on Friday. It was down 3.4% on the week, and 8.5% from its June 10 highs. Germany's Xetra Dax fell 2.8% over the week to 4,576.3. France's CAC 40 lost 4.4% to 2,983.1 - its first close below 3,000 since April 21.

The Stoxx 600 dropped 1.1% to 197.25, posting the longest stretch of weekly declines since March 6 and erasing its 2009 advance. The gauge has retreated 8.2% since June 11 on speculation share prices have outpaced the outlook for the economy after a three-month rally pushed valuations to the highest level since 2004.

GERMANY

German stocks fell as the benchmark DAX Index posted a fifth consecutive weekly decline on concerns that an economic rebound may be less robust.

K+S AG, Europe's largest producer of potash, and Deutsche Post AG lost at least 4%, while TUI AG slid 5.9% after Goldman Sachs Group Inc. cut its recommendation. Salzgitter AG gained, as did Bayerische Motoren Werke AG, the world's second-largest producer of luxury cars.

The DAX retreated 1.2% to 4,576.31 to close the week with a decline of 2.8%. The broader HDAX Index also slipped 1.2%.

Volkswagen, Europe's biggest carmaker, slid 1.9% to 213.20 Euros after Carlos Ghosn, the chief executive officer of rival Renault SA, forecast that the expiry of government-backed sales incentives will prevent a European auto-market recovery in 2010. Deutsche Post dropped 4% to 8.90 Euros, while K+S dropped 4.9% to 37.89 Euros.

Hannover Re, Germany's second-biggest reinsurer, declined 2.2% to 23.60 Euros.

TUI AG, Europe's largest tourism company, tumbled 5.9% to 3.96 Euros after its stock was cut to "neutral" from "buy" at Goldman Sachs.

Deutsche Telekom AG slipped 1.2% to 7.975 Euros. Handelsblatt reported the company's Internet broadcasts of Bundesliga soccer matches may operate at a loss, as the service has no more than around 30,000 subscribers.

Salzgitter AG, Germany's second-largest steelmaker, rose 1.2% to 59.37 Euros. The stock was raised to "buy" from "hold" at Citigroup Inc., after the brokerage raised its forecast for 2010 steel prices.

BMW gained 0.9% to 25.83 Euros as the company said it will probably bring back four-cylinder engines to meet tougher US fuel-economy standards.

Infineon Technologies AG climbed 5.4% to 2.72 Euros. The company said it planned to raise as much as 725 million Euros in a rights offer, and would use the proceeds to repay debt and strengthen liquidity.

Deutsche Lufthansa AG declined 1.7% to 8.585 Euros. The European Union said Europe's second-largest carrier proposed worse concessions than before in its attempt to take over Austrian Airlines AG, and said a "miracle" would be needed to reach a decision by the German company's July 31 deadline.

Continental fell 2.9% to 19.17 Euros after Sueddeutsche Zeitung reported that Schaeffler Group wants more time from creditors to reorganize its finances.

Fraport AG dropped 3.2% to 27.79 Euros after the company said passenger numbers at its Frankfurt airport declined 5.6% in June.

ProSiebenSat.1 Media, Germany's biggest private broadcaster, lost 7.1% to 3.27 Euros. Axel Springer AG, which had sought to buy ProSiebenSat.1 Media in 2005, failed in a court bid to overturn a German regulator's decision to forbid the takeover.

FRANCE

France's benchmark CAC 40 Index slid 42.84, or 1.4%, to 2,983.10, its lowest close since April. The benchmark lost 4.4% in the last five days, a fifth straight weekly drop and its longest stretch of declines in a year. The SBF 120 Index also fell 1.4%.

Alcatel-Lucent lost 5.4 cents, or 3.5%, to 1.49 Euros, after adding 3.9% Thursday. The world's largest maker of fixed-line networks has told labor unions it plans to cut 1,000 jobs in France by 2010, Agence France-Presse reported, citing unidentified people close to the talks.

Alstom dropped 1.04 Euros, or 2.6%, to 39.31 Euros, its fourth decline this week. Siemens AG, Europe's largest engineering company, is targeting market share of at least 10% in Africa within the next two to three years, threatening to reduce the share of its French rival.

Renault fell 34.5 cents, or 1.5%, to 22.40 Euros, bringing its drop this week to 11%. Carlos Ghosn, chief executive officer of the French automaker, said the expiry of government-backed sales incentives will offset any improvement in demand for cars and next year will be "as difficult as 2009."

Total retreated 61.5 cents, or 1.7%, to 35.99 Euros, the sixth decline in the past seven days. Europe's largest refiner dropped as crude oil fell, headed for its biggest weekly decline since January on concern a prolonged global recession will sap demand for energy.

BELGIUM

In Brussels the BEL 20 closed down 0.23% at 1,964.24.

Shares in Belgian Nyrstar fell on Wednesday after the world's largest zinc producer raised the size of a recent convertible bond by 15 million Euros ($21 million) to 120 million on strong demand.

Nyrstar's five-year convertible bond, which carries a semi-annual 7% coupon, was launched last week at 105 million Euros with a conversion price of 7.2603 Euros per share.

THE NETHERLANDS

Amsterdam's AEX finished the week at 243.20, drops of 1.58% on the day.

Loss-making Dutch builder Heijmans reported an 86.6% take-up for its rights offering and said the rump would be placed on Friday, sending its shares lower.

Heijmans's six-for-one offer at 0.70 Euro per share, a 40% discount to the expected post-offering price, had been seen by analysts as deeply discounted relative to other European offerings.

Heijmans shares were down 6.8%.

The stock doubled in early January on a land sale that eased fears about debt levels, but since then has lost about half its value. In the same time the Amsterdam midcap index is up 12.4%.

Storage specialists Royal Vopak has reached agreement with a group of investors on their participation in a renewed cumulative financing preference shares program of 110 million Euros ($154 million).

Proceeds of the renewed program will be used to finance further expansion projects, according to Vopak.

A statement from the Rotterdam-headquartered company said that four out of the five investors in the existing program, ASR Nederland, Delta Lloyd, HAL Investments, and ING AM Insurance Companies, have agreed to participate in this renewed program.

Vopak just recently announced plans to build a new fuel storage terminal in Amsterdam.

SWITZERLAND

The SMI in Zurich closed Friday out at 5,237.81, down 1.27%.

Continued uncertainty over its dispute with the US government weighed on UBS. This week the Swiss government waded into the debate, saying it would prevent the bank from handing over information on its private clients. Shares in UBS fell 2.5% to SFr12.63, while Credit Suisse was stronger than its rival, slipping just 0.7% to SFr47.66.

Zurich Financial Servies Group announced that it is offering to purchase for cash up to $728 million of certain Dollar-denominated preferred notes, at prices between 75-82% of face value.

The relevant securities are the series III floating rate enhanced capital advantaged preferred securities, and series IV and V fixed / floating rate trust preferred securities. The early deadline for the tender is 5pm New York time on 17 July.

Barclays Capital and JP Morgan are the dealer managers for the tender offer, the company said.

AUSTRIA

Vienna's ATX ended pretty much in line with Regional Bourses, down 0.77% on the day at 1,960.10.

Austria's economic growth slowed to 2.0% last year as its export-driven mini-boom began to peter out, the Statistics Office said on Friday.

The slowdown was mainly due to a marked drop in export growth to 0.8% from a revised 9.4% in 2007. Gross domestic product growth was still significantly above the Euro zone average of 0.7%, the Statistics Office said.

The Office's result is higher than the latest estimate of 1.8% 2008 growth of researcher WIFO, which compiles the Alpine country's quarterly GDP estimates.

The Office also revised upwards its own results for gross domestic product growth in 2006 and 2007 to 3.5% each, from 3.4% for 2006 and 3.1% for 2007 previously, as it continued to update its underlying database.

The data update led to an upgrade of the growth figures for industrial production and construction in particular, said the Statistics Office's Ursula Havel, the economist responsible for calculation of GDP.

In absolute terms, Austria's GDP was 282 billion Euros ($393 billion) in 2008, around 3% of the Euro zone total. GDP per capita was 33,810 Euros, the fourth-highest in the European Union after Luxembourg, Ireland and the Netherlands.

Austrian GDP is expected to contract by around 4% this year by most forecasters, in line with the Euro zone average.

SWEDEN

Stockholm's OMX 30 Index rounded off a quiet week down 0.5% at 774.12.

Swedbank dropped 8.4% to SKr44.50 and SEB lost 1.2% to SKr33.40.

Ericsson said Wednesday that it has won deals totaling $1.7 billion to deliver second- and third-generation mobile communication equipment to Chinese operators China Mobile Communications Corp. and China Unicom, indicating rapid growth on the country's telecom market.

Mats Olsson, the Stockholm-based equipment vendor's president for Greater China, told Dow Jones Newswires that the value of the deals is roughly equivalent to Ericsson's entire sales in the country during 2008, adding that "this reflects the growth we feel in China."

The framework contract with China Mobile, valued at $1 billion, includes products and solutions to expand the company's networks in 18 Chinese provinces.

Under the framework agreement with China Unicom, valued at $700 million, Ericsson will upgrade the operator's GSM networks in 10 provinces and provide GSM/WCDMA networks and wireless access system in 15 provinces.

Autoliv, worldwide leader in automotive safety, Thursday announced that its Board of Directors has appointed Mats Wallin Vice President and Chief Financial Officer of the Company. He is currently Head of Corporate Control of Autoliv.

Mats Wallin succeeds Marika Fredriksson who will be leaving Autoliv to become CFO for Gambro AB, a global medical technology company and a leader in developing products, therapies and services to treat patients with acute or chronic renal failure.

DENMARK

Sweden's neighbours saw the OMX 20 in Copenhagen dip 0.38% to finish the week at 279.84.

Denmark's Lundbeck said Tuesday it has agreed to acquire UK-based pharmaceutical company LifeHealth Limited for $147 million in cash, giving it a bigger share of the earnings from Huntington's disease treatment Xenazine.

The announcement comes after Lundbeck in March bought US-based drug maker Ovation Pharmaceuticals Inc. in a move towards bolstering its pipeline ahead of the patent expiry in 2012 of its blockbuster depression treatment Lexapro.

The deal announced Tuesday "strengthens Lundbeck's US platform and materially improves the earnings outlook in the US," the company's Chief Executive Ulf Wiinberg said.

Through the acquisition of LifeHealth, which owns 25% of the North American sales of Xenazine less production costs, Lundbeck will reduce the royalty range paid to a third party on the drug to around 40%-47% from 65%-72%.

Lundbeck sees a US sales potential for Xenazine, which Ovation launched in the US in November 2008, of more than $250 million.

The Copenhagen-based pharmaceutical company said the acquisition of LifeHealth, which will be financed through currently available cash resources, will be immediately accretive to its earnings before interest and tax (EBIT).

It maintained its guidance for 2009 EBITDA of 3.5 billion to 3.7 billion Danish kronor ($654 million to 692 million), but said it expects the figure to reach the higher end of the range following the acquisition.

FINLAND

The OMX in Helsinki dropped 1.16%, finishing the week at 5,351.64.

Finland's Ruukki Group Plc said on Tuesday it would acquire Australia's platinum-group metals producer Sylvania Resources Ltd for 268 million Euros ($378.1 million) under a merger implementation agreement.

Under the terms of the deal, each Sylvania shareholder will get 1 Ruukki share for every 1.81 Sylvania shares held, the companies said in a statement.

Based on Ruukki's closing share price of 2.24 Euros on Monday, the offer equates to 1.05 Pounds per Sylvania share, which is a premium of 28% to Sylvania'a close of 82 pence on the same day.

After the acquisition, current Ruukki Chief Executive Alwyn Smit will continue in his role, while Sylvania CEO Terry McConnachie will become CEO of Ruukki Minerals, the companies said.

NORWAY

Oslo's OBX dropped the most amongst Scandinavian Bourses; down 2.35% on the day to close at 234.79.

Norway's DnB NOR, posted a bigger-than-forecast drop in second-quarter profit on Friday after heavy losses in its Baltic operations, and said it expected further writedowns in the region in coming quarters.

Norway's largest financial services group said it saw signs of recovery but uncertainty over the economic outlook remained high.

Pretax profit at the group whose brands include Vital, Nordlandsbanken and Postbanken fell to 1.15 billion Norwegian crowns ($176 million) from 4.36 billion a year ago, below the median forecast of 2.08 billion in a Reuters poll of 13 banks and brokerages.

The company reiterated it estimated total writedowns on loans to reach between 8 billion Crowns and 10 billion in 2009, but it expected writedowns to be higher in the Baltic region than previously expected and lower in Norway.

DnB NOR in May forecast writedowns in DnB NORD of between 3 billion crowns and 4 billion, 0.7-1 billion in shipping and 4-5 billion for the remaining portfolio.

DnB NOR, the first Nordic bank to report second-quarter figures, stood by its target of pretax operating profit before writedowns of 20 billion crowns in 2010.

DnB NOR said the main reason for the decline in group profits stemmed from impairment losses for goodwill in Latvia and Lithuania and large writedowns on loans.

Shares in Norwegian video conferencing systems maker Tandberg rose against a falling market on Wednesday after Financial Times reported rumours of a possible bid.

Financial Times said in a post on its Alphaville blog that there were rumours a bidder was lining up an offer of 135 Norwegian Crowns ($20.66) per share for Tandberg.

Norwegian gas shipper Golar LNG and Thai energy firm PTT Exploration and Production have entered into an agreement to jointly develop an gas project in North West Australia, Golar said on Thursday.

A memorandum of understanding to develop floating liquefied natural gas production (FLNG) and invest in projects worldwide was signed by the two companies in August last year.

SPAIN

In Madrid the IBEX shed a little over 1%, down 1.04% on the day at 9,344.90.

It's all about people 'quitting' in Spain this week - and I don't mean smoking!

Iberia Lineas Aereas de Espana Thursday said Chairman and Chief Executive Fernando Conte had resigned, after months of protracted and unsuccessful merger talks with peer British Airways.

Conte was leaving the company for personal reasons, Iberia said in a statement. A spokesman added Conte had planned to retire at age 60 after seven years at the helm of Spain's flagship carrier.

The management shakeup comes after months of tie-up talks between Iberia and British Airways that began last summer.

The Iberia spokesman said Conte's departure wasn't related to the British Airways merger plans, adding that talks between the two companies continued.

"This has been a very carefully thought-out decision ... which I did not want to make until my successor had been decided," Conte was quoted as saying in a press release.

Antonio Vazquez, a former Iberia board member and former chief executive of Spanish tobacco company Altadis, will replace Conte as chairman and chief executive.

Banco Santander SA, Spain's largest bank, plans to exchange as much as 9.1 billion Euros ($12.8 billion) of subordinated debt for new notes at a discount as the bank seeks a stronger balance sheet.

Holders of 22 capital securities issued by Santander and its units in Euros, Pounds and Yen have until July 22 to accept the exchange offer, the lender said in a regulatory filing Friday. Santander also plans to make an offer to investors in eight Dollar-denominated notes.

Santander, which raised 7.2 billion Euros with a sale of new shares in November last year, is taking steps to protect its balance capital ratios from the effect of recessions from Spain and Mexico to the UK. Santander joins other banks such as Caja Madrid, Spain's second-largest savings bank, in asking investors to exchange subordinated debt.

PORTUGAL

The PSI General in Lisbon dropped 1.38%, closing at 2,411.00.

Galp Energia SGPS SA slid heavily this week. Portugal's biggest oil refiner forecast a decline in gasoline prices paid by consumers in the short term.

ITALY

Italy's benchmark FTSE MIB Index declined 321.57, or 1.8%, to 17,836.99 in Milan. The gauge lost 5.8% this week.

Bulgari, the world's third-largest jeweler, lost 13.5 cents, or 3.8%, to 3.41 Euros, the lowest in three months. US same store sales excluding Wal-Mart fell 5.1% in June from a year earlier, according to the International Council of Shopping Centers. The luxury segments showed a 12.2% decline from a year earlier.

Buzzi Unicem, Italy's second-biggest cement maker, fell 24.5 cents, or 2.6%, to 9.26 Euros, a third decline this week. Construction stocks were the worst performers among the 19 industry groups in Europe's Dow Jones Stoxx 600 Index Friday.

Cobra Automotive Technologies jumped 57.2 cents, or 40%, to 1.99 Euros, the biggest increase since its 2006 listing. The maker of electronic security systems was chosen by Hyundai Motors to provide parking assistance systems. "This agreement confirms the positive outcome of the international expansion strategy in the Asian region," Cassa Lombarda said in a note.

Enel SpA dropped for a fourth day this week, losing 6 cents, or 1.8%, to 3.25 Euros. Morgan Stanley resumed coverage of Italy's biggest utility with an "underweight" recommendation and a price estimate of 3.3 Euros. The brokerage cited debt that's "still high."

Fiat SpA fell 8.5 cents, or 1.3%, to 6.63 Euros. Intermonte Sim SpA trimmed its price estimate on Fiat to 6.2 Euros from 6.8 Euros. The brokerage kept an "underperform" rating.

Management & Capitali SpA advanced for a third day, adding 1.95 cents, or 2.8%, to 72 cents. Tamburi Investment Partners SpA said it would offer cash and shares to buy Management & Capitali. Tamburi announced the takeover offer in a statement to the Italian stock exchange late Thursday.

Prysmian SpA retreated 33 cents, or 3.2%, to 10.03 Euros. Copper, aluminum, nickel and zinc were among commodities that fell in the London Metals Exchange on concern the economy may take longer than expected to recover.

Saipem SpA fell for a third day this week, losing 65 cents, or 4%, to 15.8 Euros. Crude oil fell, heading for its biggest weekly decline since January.

Tenaris SA, the world's biggest maker of seamless steel tubes for pipelines, slid 18.5 cents, or 2.1%, to 8.84 Euros.

Saras SpA declined 5.9 cents, or 3%, to 1.88 Euros. Credit Suisse Group AG trimmed its estimates on 2009-11 earnings before interest, taxes, depreciation and amortization for the owner of the Mediterranean region's biggest refinery. The brokerage kept a "neutral" rating on the stock with a price estimate of 1.9 Euros.

STMicroelectronics NV, Europe's largest semiconductor maker, dropped 24 cents, or 4.6%, to 4.99 Euros. "Shares of semiconductor companies are facing some correction with ongoing concerns that the global economic slowdown is not over yet," Luca Peviani, managing director at P&G Sgr in Rome.

Telecom Italia Media SpA added 0.42 cents, or 3.7%, to 11.9 cents after surging as much as 13%. The company said it has no plan to sell its La7 television channel, according to a statement sent through the Italian exchange Friday. The company is examining options for individual television assets, it said.

GREECE

The appropriately named Athex in Athens dropped a big 2.53% Friday, closing out the week at 2,106.13.

Greece's cabinet-level privatization committee Thursday formally approved the sale of a further 5% stake in Hellenic Telecommunications Organization to Deutsche Telekom.

As part of a deal negotiated with Deutsche Telekom in May 2008, the government exercised a put option under which it would sell the OTE shares at a price of Eur27.50 each for a total consideration of Eur674 million.

The approval was expected after Finance Minister Yannis Papathanassiou announced last month the government's intention to reduce its stake in the company to 20%. After the transfer is completed, Deutsche Telekom will control 30% of the former Greek telecom monopoly.

Combined with the privatizations of Olympic Airlines and a casino on the island of Corfu earlier this year, Greece has so far raised Eur859 million from privatizations - close to its 2009 target of Eur1 billion.

Bank of Cyprus Public Company Ltd announced that as a result of the reinvestment of dividends paid on 10 June 2009, a total of 7.082.906 new ordinary shares of a nominal value of Eur1,00 each were issued.

The shares were issued to the shareholders who participated in the Bank's Dividend Reinvestment Plan at a discount of 10% to the weighted average closing price of the share on the Cyprus Stock Exchange and the Athens Exchange during the first five days after the relevant ex-dividend date. The price at which the shares were issued is Eur3,93 per share.

Following the above issue, the Bank's issued share capital comprises 593.744.562 ordinary shares.

On July 15 2009, the 7.082.906 new ordinary shares of the Bank will be introduced for trading on the Cyprus Stock Exchange and the Athens Exchange. As of 15 July 2009, the opening price of the Bank's share on both exchanges will be adjusted according to the regulations of the two exchanges.

The UK Market

Did it follow the Global trend .....

London markets drifted to a two-month low on Friday, but Emerald Energy beat the trend amid takeover speculation.

Shares in the oil explorer jumped 10.1% to 561p on talk of a bid pitched at about 750p a share. That would value Emerald at nearly #500m.

Emerald has previously been mooted as a potential target for Gran Tierra Energy, though the Canadian group would probably be more interested in its Colombian assets than its prospects in Syria.

Traders also noted Emerald's links to Russia through its largest shareholders, the oil investor Michael Kroupeev and Soyuzneftegaz, the Russian state-owned oil company.

The FTSE 100 posted a fourth weekly decline, closing the day down 31.49 points, or 0.8%, at 4,127.17. Over the week the benchmark was 2.6% lower.

The insurance sector traded lower for a fifth day amid concerns over solvency requirements and whether Aviva will cut its dividend. Aviva was down 4.9% to 278

Retailers provided a shelter, with Tesco leading the blue-chip risers on a gain of 2.9% to 357=p. "We expect Tesco to prove to be a formidable entrant to the mainstream financial services market in the UK," said Cazenove, its house broker. It predicted a gradual expansion rather than major acquisitions, at least in the short term.

"The most obvious and material opportunity lies in mortgages, while the insurance operation can both build market share in its existing categories and extend into life and protection insurance."

White goods retailers continued their strong run after department store John Lewis reported strong demand for air conditioners and fans during the UK heatwave.

Kingfisher, up 1% to 188

p, both had spare stock to clear after last year's damp summer so the John Lewis data were a "significant positive indicator", said Singer Capital Markets.

BHP Billiton fell 1% to #12.96= amid renewed speculation it was looking at buying a US potash maker.

Oil stocks were lower, tracking crude below $60 a barrel, and after Chevron warned that a sharp decline in US refining margins would hit its quarterly results.

Royal Dutch Shell's B shares dropped 1.1% to #14.44, while BP fell 0.8% to 461>p.

BG Group was off 1.5% to 979=p in spite of an RBS note resurrecting takeover theories.

"We believe that the company will continue to be viewed as an attractive addition to the portfolios of many integrated oil and gas majors," said RBS, which started coverage of BG with a "buy" rating and #13.50 target.

Venture Production was down 3% to 785p as jitters set in ahead of Monday's deadline for Centrica to make a firm bid.

After the close, Centrica launched a final cash offer of 845p per share and said it had lifted its stake in Venture to 29%.

A profit warning sent Bodycote tumbling 10.8% to 111>p. The engineer said weakness in the automotive sector was spreading to its higher-margin aerospace and energy markets.

Fears of slowing demand led Chloride to fall 6.3% to 134p after KBC Peel Hunt cut the power supply maker from its "buy" list.

SThree rose 6.5% to 182p after HSBC recommended buying the recruitment agency for its "safe" dividend yield.

While all staffing companies would suffer as wages declined, SThree was likely to be less affected because it specialised in candidates with high skills who commanded high wages, HSBC said.

Asia Pacific Regional Markets

Did they set the tone or follow the lead .....

JAPAN

Tokyo stocks closed slightly lower as broader indices remained in narrow ranges amid a pervasive lack of trading catalysts. Shippers such as Nippon Yusen and Mitsui O.S.K. Lines sank as freight rates dropped.

Other than watching recently volatile currency markets, where the Dollar has fallen precipitously against the Yen in recent days, investors appear to be cautiously waiting for next week's US corporate earnings reports, according to Mizuho Securities senior technical analyst Yutaka Miura.

On Friday, the Dollar was relatively stable, trading around Y93 throughout the Tokyo stock session.

The Nikkei 225 Stock Average fell 3.78 points, or 0.04%, to 9287.28, its eighth straight losing session and the longest such streak of the year. The index lost 5.4% for the week and is now up just 4.8% for 2009.

Shipping stocks were lower after the Nikkei reported that rates on container ships from Asia to North America have dropped for the first time in three years, and surprising the market. Nippon Yusen dropped 3.3% to Y380 and Mitsui O.S.K. Lines fell 2.9% to Y542.

Other major decliners included All Nippon Airways, which tumbled 5.8% to Y277 on massive volume as hedge funds reportedly shorted the stock before the firm sets the price of its upcoming share offer, slated for some time between July 13 and July 15.

A fund manager at a Japanese asset management firm expressed confidence that ANA will probably fall Monday as well.

On the other hand, short-covering benefited shares of Toyota Motor and Honda Motor, which rose 0.9% to Y3,430, and 1.3% to Y2,355, respectively. Fears over further Yen strengthening have already been largely factored into auto and tech stocks, said one Japanese brokerage analyst.

Tokyo Electron ended up 0.7% at Y4,270 in heavy trade after the firm said late Thursday that its combined orders for chip and liquid crystal display production equipment in the April-June period surged 82% from the prior quarter.

As for next week, the Nikkei can be expected to move in a 9000-9600 range, with US earnings and currency movements among its main determinants, said Hideyuki Okoshi, head of equities at Chuo Securities.

The Topix index of all the Tokyo Stock Exchange First Section issues fell 1.41 points, or 0.2%, to 872.50. September Nikkei 225 futures ended down 60 points, or 0.6%, at 9250 on the Osaka Securities Exchange.

SOUTH KOREA

South Korean shares closed a tad lower Friday as profit-taking in technology stocks outpaced gains in the financial sector, with most investors remaining on the sidelines amid a lack of fresh momentum.

The Korea Composite Stock Price Index, or Kospi, lost 2.27 points, or 0.2%, to 1428.62 after seesawing between positive and negative territory in light trading volume.

There wasn't much reaction to the Bank of Korea's more optimistic outlook on the economy, as this followed similar comments from the finance ministry.

The central bank expects the economy to shrink 1.6% this year versus its earlier forecast of a contraction of 2.4%, and raised its growth projection for 2010 to 3.6% from 3.5% forecast in April, following recent data that showed the economy is on the mend.

Foreigners and local retail investors were net sellers of shares worth KRW41.6 billion and KRW9.9 billion, respectively, while domestic institutions were net buyers of KRW61.4 billion worth of stocks.

Investors locked in profits in technology stocks after a sharp climb early this week, following a strong second-quarter earnings projection from bellwether Samsung Electronics.

Samsung Electronics lost 0.8% to KRW645,000, and LG Electronics dropped 2.7% to KRW126,500.

Hanjin Shipping fell 0.6% to KRW16,800, and STX Pan Ocean declined 3.7% to KRW10,350.

However, most financial stocks extended gains from the previous session on expectations of improved earnings, said analysts.

KB Financial Group gained 2.7% to KRW46,950, Shinhan Financial Group rose 2.9% to KRW34,000 and Samsung Securities added 0.7% to KRW70,200.

Internet security firm Ahnlab hit its daily upper limit of 15% for the third straight session, ending at KRW17,850, as a software virus again caused temporary disruptions to local Web sites Thursday.

HONG KONG

Hong Kong share prices closed 0.46% lower, as investors remained concerned about the state of the US economy.

The Hang Seng Index ended down 82.17 points at 17,708.42. Hong Kong shares ended 20.01 points, or 0.11%, higher at the end of the morning session after opening 29.72 points, or 0.17%, in the first few minutes of trading

The gauge fell 2.2% in its second straight weekly decline, but is still up 56% from its March lows with its constituents valued at 16 times their estimated earnings per share in 2009.

Turnover was HK$52.51 billion at the end of the day, compared with HK$29.55 billion at the break.

Shares in Hong Kong dropped as worries about the global economy kept a check on buying, but investors piled into new listings on both bourses, boding well for the languid primary market.

Investor confidence in an early global economic recovery has been tested in recent weeks amid disappointing data and talk of the need for a second stimulus package for the US

Analysts see the main index range-bound between 17,000 and 19,000 points in the short term as corporate earnings begin to trickle in.

The China Enterprises Index, which represents top locally listed mainland Chinese stocks, dropped 0.6% or 66.77 points to 10,574.42.

New listing Amber Energy, a gas-fired power plant operator, surged 63.2% to HK$2.71 on its debut, outstripping its issue price of HK$1.66. The stock opened at HK$2.56 and hit a high of HK$2.98 earlier in the session, up 79.5% with over 239 million shares changing hands.

Chinese gas distributor Zhengzhou Gas Company soared 15.8% to HK$12.02 after it said its state-owned parent was looking to sell an 80% stake to non-listed China Resources Gas Holdings through the formation of a joint venture.

CHINA

Modest profit-taking in blue chips such as insurers and steel makers overshadowed brief enthusiasm caused by the robust listing debuts of two small firms, leading China shares to end slightly lower Friday.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.3% at 3113.93. The index rose 5.5% between July 1 and Thursday.

The Shenzhen Composite Index rose 0.5% to 1042.80.

Despite the slight fall Friday, analysts said they expect the benchmark index to resume testing psychological resistance of 3300 next week on optimism about first-half earnings to be released over the next two months.

Insurance companies and steel makers dragged the indexes down as investors cashed in on recent gains.

Ping An Insurance fell 0.8% to CNY55.81 after rising 14% from July 1 to Thursday. China Life declined 1.9% to CNY29.11 following a 7.7% gain over the same period.

Baoshan Iron & Steel, China's largest steel maker by market value, dropped 1.2% to CNY8.08 following a rise of 16% since July 1.

There was a brief bout of euphoria on the stunning debuts of the first two companies to launch initial public offerings since China imposed an unofficial moratorium on new share sales in September.

Guilin Sanjin Pharmaceutical and Zhejiang Wanma Cable soared on their first day of trading on the Shenzhen Stock Exchange's small and medium-sized enterprise board.

Medicine producer Guilin Sanjin closed up 82% at CNY36.01 while information equipment maker Zhejiang Wanma surged 126% to CNY25.93.

Analysts said they see limited downside for the indexes for now and a rally could return as soon as Monday when attention shifts to earnings.

China's new RMB loans issued in the first half this year totaled more than CNY7.37 trillion, well above Beijing's full-year target of more than CNY5 trillion and more than triple last year's figure of CNY2.1 trillion.

China said Friday urban property prices in 70 large and medium-sized cities rose 0.2% in June from a year earlier, rebounding from May's 0.6% decline.

China Vanke, the country's largest property developer by market value, rose 0.1% to CNY14.27 and Poly Real Estate gained 2.0% to CNY30.32.

TAIWAN

Taiwan stocks ended up 0.32% on Friday, with chipmaker UMC, leading gains in technology shares after it reported an annual rise in June sales.

However, financial shares prevented the big board from climbing higher, as investors booked profits due to a lack of market-boosting news.

The main TAIEX shares index rose 21.68 points to 6,769.86, reaching a fresh one-month closing high, after it briefly rose above 6,800 earlier in the session.

Turnover was thin at T$110 billion ($3.33 billion) compared with Thursday's T$139 billion as investors cautious ahead of earnings releases by major US corporations next week.

A cultural and economics forum will be held in the Chinese province of Hunan this weekend, where leaders from Taiwan and China gather to discuss bilateral issues.

The main technology board was the session bright spot, with the semiconductor sub-index rising 0.52%.

Taiwan Semiconductor Manufacturing Co rose 1.45% before the company announced a fall in June sales on Friday.

United Microelectronics Corp gained 2.16% after the company booked its biggest monthly sales in nearly a year on Thursday.

DRAM shares were mixed as Powerchip, Taiwan's top DRAM chipmaker, gained more than 6% after getting a $125 million loan. Nanya Technology dropped 1.82%, after a report said it was seeking state funding to develop new technologies.

The optoelectronics sub-index rose 0.18%, extending a five-session winning streak.

AU Optronics, the world's No.3 flat panel maker, edged up 0.28% after a report said the company planned to introduce new-generation flexible displays or e-paper for electronics reading devices in the third quarter this year.

The bank and insurance sub-index lost 0.52% after a report said Taiwan's top financial regulator eased real estate investment restrictions on the insurance sector.

Analysts said investors should brace for a bumpy week, as some figures from major corporation in the United States could hurt export-reliant technology shares.

THE PHILIPPINES

The bellwether index rose to a three-week high after the Philippine central bank's Monetary Board cut interest rates by another 25 basis points, bringing borrowing costs to an all-time low.

However, the rate-sensitive financial index bucked the trend as it gave up 0.43% or 2.42 points to 548.35.

Union Bank of the Philippines was unchanged at P25 while Metropolitan Bank & Trust Co. ended higher at P32. Sy-led Banco de Oro Unibank Inc. weakened at P31.

Trading was far from lethargic as volume of shares changing hands hit 1.03 billion worth P2.23 billion. Market breadth was positive as gainers beat losers at 51 to 45 while 56 issues did not budge from previous close.

In its monthly meeting Thursday, the Monetary Board cut key policy rates for the sixth time with overnight borrowing or reverse repurchase (RRP) facility at four% and 6% for the overnight lending or repurchase (RP) facility, effective immediately.

BPI Securities Corp. said that the PSEi will test the 2,500 level after a period of consolidation after the market expects another rate cut with inflation dropping to 1.5%.

The industrial index posted biggest gains of 1.04%, closing 37.38 points higher at 3,632.47.

Manila Electric Co., which was the fourth actively traded stock, trekked higher by 2.7% to P179. The power distributor expects to hit a net income as high as P15 billion this year with the performance-based rate mechanism.

The mining and oil index rose 0.65% or 38.38 points to 5,912.56 while service index inched up 0.77% or 10.04 points to 1,317.15.

Rate-sensitive property index gained 0.44% or 3.6 points to 823.33. Megaworld Corp., which was the 11th actively-traded stock, ended stronger at P1.

Holding firm index added up 0.25% or 3.36 points to close higher at 1,337.61.

SINGAPORE

Singapore shares closed little changed on Friday with investors reluctant to over-commit ahead of the upcoming June quarter earnings reporting season, dealers said.

The blue chip Straits Times Index was 0.37 points, or 0.02% higher, at 2,307.98. Volume traded totalled 942 million shares worth $892 million (US$610 million) and there were 150 rising issues, 239 losers while 856 issues were even.

Property stocks were among the losers with CapitaLand off 11 cents to $3.39, City Developments also fell by the same margin to $8.20 while Keppel Land lost six cents $2.10.

Singapore Telecommunications was off one cent to $3.16, Singapore Airlines rose 10 cents to $13.14 and ST Engineering eased four cents to $2.49.

INDONESIA

A surge in cigarette and property shares at the Indonesian Stock Exchange here early Friday, made the Composite Stock Price Index climb slightly at the opening of the bourse`s morning session.

The BEI index started 0.03% or 0.536 point higher at 2,084.510 and the LQ 45 index went up 0.01% or 0.049 point to 406.136.

The victory of the Susilo Bambang Yudhoyono-Boediono pair in the recent presidential poll had a positive effect on the Indonesian stock market which had tumbled over the past few days.

Among shares which increased were Bukit Asam that added Rp350 to Rp11,600, cigarette company HM Sampoerna which gained Rp300 to Rp9,500, cigarette company Gudang Garam which advanced Rp200 to Rp12,650, and Astra Agro Lestari which rose Rp150 to Rp17,000.

Meanwhile, the rupiah sharply gained at the Jakarta interbank spot market here on Friday morning, to nearly the level of Rp10,000 per US Dollar, as investors actively bought the local currency following the victory of the Susilo Bambang Yudhoyono (SBY)-Boediono pair in the recent presidential poll.

The Indonesian currency traded at Rp10,125-Rp10,135 per US Dollar, up 65 points from Rp10,190-Rp10,200 at the market`s close a day earlier.

MALAYSIA

Share prices on Bursa Malaysia ended the week mixed with most investors staying on the sidelines fRIDAY, ahead of the weekend amid lack of fresh leads and weak underlying sentiment, dealers said.

However, continued interest in key stocks like Tenaga Nasional and newly-listed Xingquan International kept the FBM KLCI up, they said.

At close, the FBM KLCI added 2.08 points to 1,067.76 after opening 0.98 of a point lower at 1,064.7 and touching an intra-day high of 1,072.3.

The Plantation Index was up 25.37 points at 5,260.82 at close while the Industrial Index shed 2.2 points to 2,372.38, the Finance Index fell 21.60 points to 8,552.22 and the FBMEmas Index rose 18.19 points to 7,197.74.

The FBM Top 100 increased 20.49 points to 7,007.81, the FBM70 gained 48.02 points to 7,121.64 and the FBMMesdaq Index dropped 14.11 points to 3,866.73 but the FBM2BRD Index was 6.32 points higher at 4,709.49.

Advancers led decliners by 285 to 260 while 220 counters were unchanged, 467 untraded and 35 others suspended.

Total volume declined to 681.782 million shares worth RM1.110 billion from 697.589 million shares worth RM1.146 billion Thursday.

China's shoe manufacturer Xingquan International Sports Holdings Ltd, the first foreign company to be directly listed on Bursa Malaysia's Main Board, recorded a 12 sen premium on its debut at RM1.83.

Xingquan, which saw its share price ended at RM1.78, up by seven sen, was the most active Friday, having touched an intra-day high of RM1.91.

Among the other active counters, KNM Group went down 1.5 sen to 73 sen, UEM Land was flat at RM1.42, Talam Corp-RCPS dropped half sen to eight sen and Sino Hua-An was 2.5 sen lower at 49.5 sen.

Of the heavyweights, Tenaga Nasional rose 30 sen to RM7.90 and Maybank slipped 15 sen to RM5.65 while Sime Darby, Bumiputra-Commerce and IOI Corp were all unchanged at RM7.20, RM9.20 and RM4.54 respectively.

The Main Board volume declined to 593.695 million shares valued at RM1.082 billion from 623.643 million shares valued at RM1.119 billion Thursday.

Turnover on the Second Board, however, increased to 45.753 million shares worth RM20.54 million from 42.083 million shares worth RM21.296 million previously.

The Mesdaq volume was higher at 26.616 million shares valued at RM4.334 million compared to 18.604 million shares valued at RM2.794 million Thursday.

Warrants went up to 13.539 million shares worth RM2.043 million from 10.012 million shares worth RM1.325 million previously.

THAILAND

The SET in Bangkok dropped 2.14% Friday to close at 569.56.

The energy sector index shed 2.8%, led by active selling in top energy firm PTT and its subsidiaries after oil traded below $60 a barrel. PTT lost 3% to 222 baht and its PTT Exploration and Production unit declined 3.6% to 120.50 baht.

Top coal miner Banpu fell 2.2% to 308 baht.

Shares in ACL Bank rose nearly 3% to 7.05 baht on a report the government would conclude a plan to sell a stake in the bank to Industrial and Commercial Bank of China (ICBC) in the next few months.

Local newspaper Khao Hoon reported the Finance Ministry, which owns 30.6% of ACL, was considering merging ACL with Siam City Bank SCIB.BK if the deal with ICBC did not go through. Siam City Bank shares rose 1.8% to 17.10 baht.

Shares in brokerage Country Group advanced nearly 2% to 1.55 baht after the company said it expected to return to a net profit this year thanks to its rising market share. Earlier, the stock hit 1.59 baht, the highest in nine years.

INDIA

The downtrend at the Indian equities markets continued Friday, with a key index losing its way towards closing bell after rising more than 140 points to end trade over 253 points in the red.

The 30-scrip benchmark index of the Bombay Stock Exchange, the Sensex, which opened at 13,803.12 points, fell 253.24 points or 1.84% to 13,504.22 points.

The fall was made steeper by heavyweight Reliance Industries falling about 4% or Rs.73.95 to Rs.1,778.40.

The Nifty of the National Stock Exchange too closed lower at 4,003.9 points, down 1.89%.

Broader market indices similarly came under selling pressure, with the BSE midcap index ending 1.92% down and the BSE smallcap index closing 1.79% lower.

Of the 13 sectoral indices on the BSE, those for energy, power, and capital goods lost the most, while only IT stocks led by Wipro and Infosys ended on the gaining list.

The market breadth was negative with 772 stocks advancing compared to 1,785 declining. Eighty-one remained unchanged.

Gainers among the Sensex included Wipro, up 3.37% at Rs.384.70; Sterlite, up 3.32% at Rs.575.70; Infosys, up 2.97% at Rs.1,726.50; and TCS, up 1.56% at Rs.394.65.

Among the losers were Reliance Infra, down 6.5% at Rs.1,029.45; Jaiprakash Associates, down 5.62% at Rs.186.25; Reliance Communications, down 5.43% at Rs.242.15; and HDFC, down 4.66% at Rs.2,199.15.

Data with the market watchdog, Securities and Exchange Board of India, showed that foreign funds were net sellers, shedding shares worth $59.6 million Friday.

AUSTRALIA

Position squaring boosted the Australian market to a four-day high Friday, with cyclical sectors enjoying some recovery after offshore markets reversed some of the recent weakness in commodity prices and equities.

The benchmark S&P/ASX 200 rose 30.8 points or 0.8% to 3794.1 on light share trading volume, leaving it down 0.9% for the week. The index bumped up against the resistance line from a head and shoulders pattern which targets 3450.0, according to Dow Jones Newswires technical analysis.

All sectors rose, with property trusts outperforming and energy and healthcare stocks underperforming.

In resources, BHP is rose 1.1% to A$32.65, Rio Tinto rose 1.6% to A$48.36 and Newcrest rose 1.9% to A$30.16, while Fortescue fell 2.0% to A$3.40, OneSteel fell 2.0% to A$2.43.

Alumina fell 2.6% to A$1.32 after Alcoa World Alumina and Chemicals joint venture partner, Alcoa, fell 2.4% despite reporting a smaller than expected quarterly loss.

Energy Resources of Australia rose 4.0% to A$21.49 after UBS upgraded ERA to buy, but Woodside fell 0.5% to A$39.90.

Financials mostly rallied, with National Australia Bank up 1.4% to A$22.38, Westfield up 1.8% to A$10.95, Stockland up 2.3% at A$3.08 and AMP up 3.1% to A$4.72.

In the industrials sector, Brambles rose 1.6% to A$5.74, Macquarie Airports rose 2.8% to A$2.17 and Leighton rose 1.6% to A$21.87.

Consolidated Media fell 1 cent to A$2.60, despite further large scale buying, with a special trade of 3.4 million traded at A$2.60 a share.

James Packer's Consolidated Press disclosed it bought 9.7 million shares Wednesday and Thursday, lifting its stake to 39.32% from 38.42%.

Traders said the buying showed James Packer had no intention of letting Consolidated Media being taken over, amid speculation that Kerry Stokes' Seven Network was behind heavy buying of Consolidated Media shares this week.

NEW ZEALAND

New Zealand shares finished the week flat Friday, with stocks generally biased down amid a lack of positive catalysts and mixed Asian equities.

Brokers said school holidays in New Zealand and subdued winter trading reduced activity to a trickle, which contributed to the general lack of direction and masked the underlying price action.

Investors are now waiting for the results season which kicks off at the end of this month for some direction.

Bellwether Telecom continued to weigh on the market, closing down 1.1% at NZ$2.67.

Blue-chips were mixed with Fletcher Building closing up 0.8% at NZ$6.55, but brokers said light volumes made it difficult to gauge underlying demand.

The NZX-50 Index fell 0.1%, or 3.4 points, to 2,738.28. The market lost 0.8% during the week.

Elsewhere in the market, casino operator Sky City gave up 1.1% to NZ$2.65 despite saying late in the session it had cut its company debt by 9% after using equity it raised in April to retire US$53 million. Sky has been hurt by poor sentiment surrounding casino operators in Macau and around the globe.

Retail stocks were mostly down with data continuing to show that consumption across the general economy remains extremely restrained. Discount retailer The Warehouse fell 0.8% to NZ$3.70, and jewelry retailer Michael Hill declined 1.6% to NZ$0.63.

Among gainers, chemicals maker Nuplex Industries advanced 0.7% to NZ$1.54. The company recently completed a capital raising and brokers say there are signs the company's main offshore markets are slowly starting to recover.

Global Commodities

'Food for thought' or 'a Grain of truth' .....

Oil suffered a sharp correction this week, falling below $60 a barrel for the first time since mid-May, as bearish US supplies data took its toll on investor sentiment.

Weekly official US inventories data showed that distillates stocks rose to the highest level in nearly 25 years.

The market interpreted this news as conclusive evidence that demand was worryingly soft in the world's biggest consumer of petroleum products.

A lukewarm oil outlook from the International Energy Agency, the energy watchdog of the developed world, did little to reassure the market.

The IEA said it expected global oil demand to rise by 1.7%, or 1.4m barrels a day, in 2010, with the increase in demand coming largely from developing countries.

Nymex August West Texas Intermediate fell 1.1% to $59.20 a barrel on Friday, down 11.3% over the week.

ICE August Brent lost $1.30 to $59.80 a barrel, down 8.9% this week.

A year after crude hit its all-time high of more than $147 a barrel, the Commodities Futures Trading Commission, the US oil futures regulator, said it would consider clamping down on energy speculators by introducing limits on position sizes.

Soyabeans fell sharply after a US government report showed that the US stock position was not as tight as previously thought. US soyabean stocks were forecast at 250m bushels by the end of 2009-10, above the 218m bushels expected by analysts.

The CBOT July soyabean contract dropped 10.9% to $10.90 a bushel this week.

Gold slipped towards the $900-an-ounce mark, down 2.3% to $910.30 this week, as investors withdrew funds from the SPDR gold trust, the largest physically backed bullion exchange-traded fund.

Global Currencies

In for a Penny, in for a Pound .....

The Yen surged to a five-month high against the Dollar this week as rising risk aversion prompted violent price action on the world's currency markets.

Nervousness over the health of the global economy and the onset of the third-quarter corporate earnings season triggered a surge in haven demand for the Japanese currency on Wednesday.

In thin trading conditions as dealers in London were heading home, the Yen breached a series of key technical levels.

Traders said the exact cause of the flood into the Yen, which had its haven credentials boosted by news of a fifth consecutive current account surplus in May, was hard to pinpoint.

However, the Yen's surge came as investor confidence was knocked by tumbling oil prices, falling bond yields and retreating equities and commodity prices.

Some also pointed to escalating tensions between Australia and China as a cause for the sharp drop in risk appetite.

Over the week, the Yen surged 3.7% to Y92.43 against the Dollar, its strongest level since February, gained 4% to a seven-week high of Y128.65 against the Euro and climbed 4.3% to Y149.61 against the Pound.

The Yen rose more aggressively against the Australian Dollar, up 6% over the week to Y71.77.

Falling investor sentiment also hit emerging market currencies, sending the South African Rand down 3.7% to R8.2055 against the Dollar over the week, the Brazilian Real 3.2% lower to R$2.0125 and the Turkish Lira 1.4% weaker to TL1.5500.

Market nervousness also boosted haven demand for the Dollar. However, the US currency's gains were tempered by worries that the Dollar's reserve status might be up for discussion at the G8 meeting of global leaders in Italy.

In the event, though, the Dollar showed little reaction to comments apparently aimed at its dominance.

Although he did not name the Dollar directly, Dai Bingguo, Chinese state councillor, called for the world to diversify the reserve currency system and aim at relatively stable exchange rates among leading currencies.

The Dollar rose 0.3% to $1.3920 against the Euro over the week and gained 0.6% to $1.6192 against the Pound.

The Pound eased 0.3% to #0.8595 against the Euro over the week. However, the weekly move belied a volatile week in which Sterling fell sharply ahead of the Bank of England's policy meeting on Thursday.

The Pound fell on expectations that the Bank would announce an expansion of its quantitative easing programme on Thursday. But Sterling rebounded after the Bank said it was keeping its asset purchase programme target unchanged at #125bn.

And bringing currencies to a close this week in the manner that I usually do, to the RMB. On the over-the-counter market, the Dollar ended at CNY6.8328, up from Thursday's close of CNY6.8317. It traded between CNY6.8314 and CNY6.8337.

The Dollar-RMB central parity rate was set at 6.8313, down from 6.8325 Thursday.

China

Key news eminating from China this week .....

China has launched its highest-profile criticism of the dominant role of the US Dollar as a global reserve currency at a meeting of the world's biggest economies.

Dai Bingguo, Chinese state councillor, raised the issue on Thursday when he joined the leaders of four other emerging economies for talks with the leaders of the Group of Eight industrialised nations - including US President Barack Obama - in the earthquake-damaged Italian town of L'Aquila.

The remarks, in front of Mr Obama, caused concern among western leaders, some of whom fear that even discussion of long-term currency issues could unsettle markets and undercut economic recovery.

Gordon Brown, Britain's prime minister, said he did not remember Mr Dai making the remarks. But he said the focus should be on moving the world out of recession.

"We don't want to give the impression that big change is around the corner and the present arrangements will be destabilised," said Mr Brown.

"We should have a better system for reserve currency issuance and regulation, so that we can maintain relative stability of major reserve currencies exchange rates and promote a diversified and rational international reserve currency system," said Mr Dai, according to the Chinese foreign ministry.

While he did not name the Dollar, Mr Dai was unequivocal in calling for the world to diversify the reserve currency system and aim at relatively stable exchange rates among leading currencies.

The Dollar weakened in early trading, although it was difficult to tell whether this was due to the Chinese remarks or cross-currents in risk appetite and economic data.

Analysts said Mr Dai's comments - which follow earlier statements by the People's Bank of China in March - appeared mostly political in nature. While China desires in the long run to move to a more multipolar global financial system, Chinese officials understand that there is no alternative to the Dollar in the short term and may not be for many years.

By faulting the Dollar Beijing can express its displeasure at US policy and exert leverage over the US in general, including in the broad debate over the future governance of the international financial system.

The challenge also serves as a shot across the bows for the US at a time when China is concerned about giant US government deficits and the Federal Reserve's unorthodox monetary policy. Beijing wants the US to take seriously its obligation to sustain the value of China's nearly $2,000bn in US Treasuries.

Separately, Joseph Yam, chief executive of the Hong Kong Monetary Authority, said Hong Kong might consider diversifying more of its US$200bn reserves away from the US Dollar.

Mr Yam said he had an "open mind" as to whether the territory would invest its reserves in renminbi-denominated assets.

"There may come a time in the future when we think that a small, modest exposure to the renminbi - notwithstanding it being a non-convertible currency still - may be something that we may pursue. But we don't have any plans at this moment, any concrete plans," said Mr Yam.

"A bit of diversification won't hurt us," he added.

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China's passenger car sales rose 48% in June on the same month last year, according to data released on Thursday. The rise consolidates a remarkable recovery that has catapulted China to the top position in the world vehicle market so far this year.

The strength of China's vehicle sales - total vehicles sales rose 18% for the first half year to 6.1m from the same period last year - has surprised car market analysts, government officials and even the country's carmakers, many of whom are scrambling to produce enough vehicles to meet demand.

Some car dealerships have reported shortages of vehicles and western carmakers such as Volkswagen and General Motors have had to increase production sharply at their Chinese joint ventures to meet local demand.

Like other sectors of the Chinese economy, car industry growth this year was jump-started by the government's January announcement of tax breaks on small cars and subsidies for vehicle purchases in rural areas.

But car segments not targeted by tax breaks or subsidies also saw strong growth in sales, car industry analysts said.

High levels of bank lending are also believed to have helped spur demand. China on Wednesday announced that new lending in the first half was Rmb7,400bn ($1,084bn), up 201% year-on-year and equal to 150% of full-year lending in 2008.

Lending for car purchases had not risen - most Chinese buyers use cash for vehicle purchases - but higher levels of liquidity in general fed through to more corporate purchases of vehicles.

Total vehicle sales rose 36% in June year-on-year, the official Xinhua news agency said, quoting figures from the China Association of Automobile Manufacturers. It was the fourth month in a row that sales had exceeded 1.1m units.

By contrast, the Society of Indian Automobile Manufacturers said car sales in India rose an annual 7.8% in June, while the Moscow-based Association of European Businesses said sales in Russia shrank 56% year-on-year.

Total US light vehicle sales for the first half of this year were 4.8m.

The strength of the Chinese market is providing a rare ray of hope for western carmakers already operating in China . This week, Fiat signed a joint venture agreement with Guangzhou Automobile Group to make cars and engines in China from 2011.

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Beijing may be prepared to do whatever is required to quell the riots in Xinjiang province but, on a national scale, also whatever it takes to manufacture an 8% economic growth rate. If that means hosing the economy with more credit than it knows what to do with, so be it. Coincidence or not, the Tiananmen uprising took place in a year when economic growth more than halved.

However, China's increasingly fretful banking regulator worries that rampant credit growth "poses risks" to the financial system. The warning comes after banks advanced Rmb5,840bn ($855bn) of new loans in the first five months, almost triple the amount a year earlier. As for June's lending, at $220bn it was a blockbuster as banks pumped up their quarterly loan numbers, just as they did in March (to $280bn).

An unknowable amount of this cash has ended up on the blackjack tables of Macao - or that other casino, the Shanghai Stock Exchange, where daily volumes are currently three times the five-year average. But even assuming that most has gone where intended, there are still many reasons to worry.

Chinese banks seem ill equipped to handle asset growth like this. To win mandates on plum infrastructure projects such as public housing and transport, lenders have relaxed standards. Meanwhile, big corporates are awash in liquidity: some are simply putting loans back on deposit or lending on to lesser credits denied bank finance. In the first quarter, direct lending to small and medium-sized companies - the engine of any economy - accounted for less than 5% of the total.

China failed to complete a $4.1bn auction of one-year government bonds on Wednesday, suggesting that investors are positioning for higher inflation caused by the credit surge. For Beijing, that is a secondary concern. As strong growth figures should confirm next week, in the 60th year of the people's republic, and in a month with the worst ethnic violence suffered since the cultural revolution, the priority remains maintaining growth.

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The Shenzhen stock exchange on Friday used new suspension rules to halt trading in Guilin Sanjin Pharmaceutical and Zhejiang Wanma Cable, China's first two initial public offerings in 10 months, after they rose more than 20% on their debut.

The Shenzhen exhange, which hosts mostly small- and medium-sized companies, adopted rules earlier this month aimed at preventing the wild fluctuations in new share prices which were common in China's IPO boom of 2007. The exchange said it would suspend trading in IPO shares for 30 minutes if prices rise or fall 20%, and for another 30 minutes if they gain or lose a further 50%.

The two listings are being closely watched because they are expected to test the success of new listing rules from China's securities market regulator, the CSRC, which last month rewrote listing rules to ensure that IPOs are more realistically priced - and less like a guaranteed lottery ticket, with startling first-day premiums for investors.

Despite the resumption of Chinese IPOs, and news this week of a Rmb2bn ($293m) listing planned by Sichuan Expressway, the Shanghai composite index remained the best performing major index in the world this year.

Guilin Sanjin, a Chinese traditional medicine maker, was halted mid-morning after rising 20% to Rmb39 from the Rmb32.50 opening price. Wanma, which supplies cable to the nation's dominant electricity distributor, was suspended at Rmb26.95. It opened at Rmb22.50.

Separately, shares of a Chinese power plant operator rose as much as 72.9% on their trading debut in Hong Kong on Friday. Amber Energy reached an intraday high of HK$2.87, compared with the issue price of HK$1.66. The benchmark Hang Seng index was up 0.11%.

Another Chinese company, Xingquan International, rose 8.2% to M$1.85 when it began trading in Malaysia on Friday. The sports shoemaker's offering is Bursa Malaysia's first straight listing by a Chinese company.

Summary

The coming week looks like .....

As mentioned at the outset, markets this week have been 'nervous' and whilst they have been slightly negative across the board, next week is going to bring huge volatility I feel with markets up and down like the proverbial yo-yo.

Next week's bevy of data coupled with second-quarter earnings reports are poised to awaken them, that's for sure.

Notable US companies Johnson & Johnson, JPMorgan Chase and Google are among those slated to report results next week, and cautious investors are hoping for better-than-expected results, indicating that the economy is indeed on the road to recovery (not!).

Investors have been waiting for earnings season to provide some direction and whilst Alcoa's report earlier this week of a lower-than-expected loss set a good tone, Chevron's warning that its second-quarter earnings could disappoint hit markets Friday, sending spreads wider.

Chevron warned Friday that second-quarter earnings in its downstream segment will be "significantly lower" sequentially, while the upstream operations will benefit from high crude oil prices, largely offset by the cooling Dollar.

Some of the US's largest banks, and a former Wall Street firm turned bank- holding company, report second-quarter results next week. The latter, Goldman Sachs, which reports Tuesday, is expected to post a profit of $3.42 a share, down from $4.58 a share a year earlier. Analysts predict Goldman will post the best quarter-on-quarter increase in investment-banking revenues compared with rivals, with stronger fee income, especially from debt and equity underwriting, as the main earnings driver.

Investment banking and a boom in mortgage refinancing also are likely to help big banks offset rising losses from bad loans. JPMorgan Chase will post results Thursday as I mentioned, and Citigroup and Bank of America both Friday. JPMorgan and Bank of America's earnings should be far below a year earlier, while Citi's loss is likely to narrow.

However, I would add a note of caution where Citibank are concerned because I have been watching this bank closely this week and I feel that with their 'creditworthiness' now coming into question, could we be looking at the sequel - 'Credit Crunch Part Two' as far as this American giant is concerned?

I'm sure that they would have us believe all is well at Citibank but I am starting to get those little 'nagging doubts' that perhaps all is not as it should be with this global banking household name.

Unfavorable currency-exchange comparisons are expected to hurt second-quarter earnings of major US-based pharmaceutical companies. But the quarter could be the nadir for negative currency impacts, which analysts expect to ease in the second half of the year. Overall, Big Pharma continues to face sales pressure from generic competition, the weak economy, increased scrutiny of drug safety and difficulties bringing new products to market. The companies are cutting costs to bolster profits in the face of such challenges.

General Electric reports second-quarter results next Friday, with concerns rampant regarding proposed new financial regulations that some observers say eventually could push the conglomerate to spin off its big finance arm, GE Capital. Investors will be closely scrutinizing GE's comments regarding the matter.

They will also be looking to GE's big industrial businesses, which make everything from aircraft engines to locomotives, for clues about the economy's direction. Expectations are low, with GE forecast to earn 23 cents a share, compared with 54 cents a year earlier.

Economists predict June measures of wholesale and consumer prices will show larger increases than in recent months. The Producer Price Index, out Tuesday, is expected to climb 0.8%, compared with 0.2% in May, and the Consumer Price Index, out Wednesday, is seen up 0.6%, compared with 0.1% last month. The government also reports on June retail sales Tuesday and industrial production Wednesday.

A government report Friday is expected to show lower housing starts in June but an increase in building permits. The National Association of Home Builders issues its July housing market index Thursday.

Regional manufacturing reports will be released by the New York Fed on Wednesday and Philadelphia Fed on Thursday. The Federal Reserve issues minutes from its June meeting on interest rates Wednesday.

Former Treasury Secretary Henry Paulson is expected to testify Thursday before US lawmakers on the government's role in Bank of America's (BAC) acquisition of Merrill Lynch. Paulson's testimony will mark the third in a series of high-profile hearings held by the House Committee on Oversight and Government Reform. He is likely to discuss when federal officials became aware of mounting losses at Merrill Lynch and the decision to give Bank of America an additional $20 billion rescue in January.

Securities and Exchange Commission Chairwoman Mary Schapiro will testify Tuesday before a House panel to discuss the challenges the SEC faces in a post- Madoff world. The hearing will be held by the House Financial Services Capital Markets Subcommittee, which has jurisdiction over the SEC.

Looking at the markets though, as I have been saying for six weeks now, the weekly charts for the Dow, S&P 500, and NASDAQ reflect the return of the Bear Market.

The weekly chart for the Dow stays negative on a close below the five-week modified moving average at 8,364. Next week the down trend resistance is 8,801. Quarterly support is at 7,681.

Investors will also be looking closely at June's producer price index, housing starts and the latest weekly jobless claims data for clues on which way the economy is headed.

Quite simply, you can't have a bull market for stocks with a bear market in housing and financials.

The sharp jump in yields in gilts, Euro zone debt, and Treasuries seen after the Bank of England deferred any decision on expanding its QE program gave a good indication of how bond markets could react when central banks flag that the QE taps will finally be turned off for good.

Implementation of exit strategies may be some way off and producer and consumer price data from both sides of the Atlantic next week are likely to be subdued. However, base effects from the oil price peaks of 2008 are expected to fade in the coming months, leaving a less supportive inflation backdrop.

Besides the faltering global economic picture, Euro traders are feeling pressure from reports that the International Monetary Fund is actively discussing aid programs with distressed Eastern European nations. The problem with toxic assets in the Eastern European banks has been swept aside since February but has now risen to the spotlight again. With these problems lingering investors have become more risk averse toward the Euro. This is leading to selling pressure on the Euro as traders are seeking safety in the US Dollar and the Japanese Yen.

The issue developing in Europe is whether the IMF will ask the European Central Bank to help provide aid to the distressed Eastern European banks and governments. This is helping to put pressure on the Euro. This news should not come as a surprise to the ECB which can be accused of dodging the toxic asset problem for months. Its general feeling is that these Eastern European countries created their own problems by trying to expand to aggressively and taking on more debt than they could handle.

Here in the AsiaPac' region, the BOJ's policy meeting poses thorny questions on quantitative easing (QE), with the policy debate complicated by sharp gains in the Yen.

The Yen has risen as much as 10.5% in three months against the Dollar and is nearing the 90 threshold which is viewed by the foreign exchanges as the point at which the Japanese authorities start ratcheting up the rhetoric. Further sustained Yen gains will fuel market debate about the fallout for carry trades and for exporters - and by extension economic activity.

Japanese Yen investors are pulling their money out of global equity markets and bringing their money back home despite receiving literally no return on capital. This move by the Japanese investor is a clear sign that return of capital is more important than return on capital at this time.

Declining economic data led by the news that China's economy may not be as rosy as investors thought earlier in the year is leading to speculation that the global economic recovery is stalling and that investors will be more defensive in their investment strategy going forward.

Earlier in the week the International Monetary Fund said the global economy will shrink 1.4% this year before expanding 2.5% next year.

While next year's forecast seems a little too optimistic, traders are focusing on the current economic environment and reacting as if the 1.4% contraction this year may be difficult to obtain.

As I say, it is going to be the choppiest week for some months next week and so don't be surprised if the Dow is sat at 8,400 when you go to put the kettle on (the same kettle I mentioned at the start) and by the time you sit back down it's at 8,100 - and once the tea if finally ready, it's back up at 8,600.

Seriously, it's going to be that kind of week ahead!

As always, I will keep you posted with major developments as/when they occur in the week ahead. In the meantime, I wish you all a very pleasant weekend.

Market Newsletter Written By

Adrian Page

Managing Director

Financial Page International