World markets survive another scare

There is no escaping volatility for the global stock markets as sovereign debt concerns continued to haunt investors around the world. Global markets had another topsy-turvy week, though they did manage to rebound by the end of the week. Remarks by an official in Hungary that the country might default on its debt unnerved investors before the government swung into action to limit the damage. The Hungarian prime minister announced an economic plan that included cuts in public-sector wages. Greece's main share index hit its lowest level since March 1998 and the euro sank to a four-year low against the dollar.



In addition, credit rating agency Fitch warned the UK that its fiscal challenge was formidable, and called for much deeper reductions in public spending. The recently elected British premier David Cameron said that the proposed emergency budget, to be unveiled on June 22 would change the nation's whole way of life.

However, the panic proved to be short-lived as investors heaved a sigh of relief following the release of a spate of encouraging economic numbers, particularly from the Asia Pacific region. Economic reports from Japan to Australia reassured investors that the global recovery is in tact, notwithstanding the European debt crisis. Beijing announced a sharp jump in May exports, boosting investors' confidence about its economy's strength.

Also, the US Federal Reserve said that it would act as needed to support the economic recovery. Government reports showed that Chinese industrial output, retail sales and fixed-asset investment climbed, while inflation accelerated to the quickest pace in 19 months. The euro rebounded and was on track to post its biggest weekly gain this year. Copper also rose for the fourth day in a row, though crude slipped to trade below US$75 per a barrel.

Belgium, Portugal and Spain found good demand for their bonds this week. Italy too carried out a successful sale on Friday, easing immediate concerns about funding problems on the euro-zone periphery and boosting appetite for the euro, banking shares and battered Spanish stocks. World stocks measured by the MSCI All-Country World Index advanced 1.6% this week. The Stoxx Europe 600 Index was heading for a 2.1% gain this week.