Europe and Britain
The FTSE rebounded from its low levels before the September 11, closing 10.5 percent higher on the week. The absence of any further attacks, or any U.S. military action in Afghanistan, seemed to have helped investors regain their equilibrium. Some analysts feel that the rally in equities is justified on valuation grounds, that the market is oversold and very undervalued. As the markets rallied activity subsided from the frantic levels seen before last week, when four billion shares were traded in one session. The CAC and DAX also followed a similar pattern. Economic data were ignored while investors worried about all things military and political.

Asia
Japan's outlook darkened; economic data continues to suggest that the country is diving into recession and banks admitted that the recent stock market plunge has hurt them badly. The Nikkei 225 closed below 10,000 on Friday - the last day of the first half of the fiscal year. This date is significant because the banks now have to revalue their equity portfolios at market prices (or mark to market), and if their portfolios drop, it reduces their level of capital. The Nikkei has fallen about 25 per cent in the past six months - meaning that many banks have seen their capital badly eroded at a time when they are also using this capital to write off bad loans.

The Bank of Japan claims that it is now seeking to curb deflation by flooding the markets with liquidity and driving the yen lower. This comes after its massive burst of yen selling over the past two weeks, worth an estimated $20 to $30 billion. Prime Minister Junichiro Koizumi promised to resolve the banks' bad debt problem within three years and forge ahead with his plans for economic structural reform.

Introduction   •   Global Stock Market Indexes   •   Recap of Global Markets   •   Currencies   •  Indicator Scoreboard

The Bottom Line   •   Looking Ahead