Europe and Britain
European equities were punished - and rewarded - by U.S. stocks. Volatility was the rule of the week. The FTSE-100 plunged on Wednesday to its lowest levels since January 1996. In the four trading sessions through Wednesday, the FTSE had lost about 12 percent. By the close on Friday, however, the FTSE managed to regain the 4,000 level. Rumors surfaced and multiplied throughout the week that a host of companies were possibly guilty of malfeasance.

The Frankfurt DAX, dropping 8 percent, was the big loser on the week, victimized by market volatility and another string of disappointing economic indicators. The DAX followed the U.S. rally on Wednesday but then slipped back on Thursday. The CAC lost 4.6 percent on the week, though it did manage to rally on Thursday and Friday. Telecommunications, technology and banking stocks took the brunt of the losses.

Asia
Asian indexes fell again. As the Nikkei sinks, worries resurface over the solvency of Japanese banks. Prior to the close of the Japanese fiscal year on March 31 and before the February-March rally, market players feared that the banking sector would tumble like a house of cards. A miraculous rally has since saved the day. The Nikkei has held up well, with government pension funds jumping in to buy stocks at critical times. But this week, with the index now below 10,000 again, the jitters returned.

The Nikkei ended the week at 9,591, just a tad below the 9,600 level that some analysts say may push capital ratios of major Japanese banks below the critical level of 10 percent. While this is still over the Bank for International Settlements' standard of 8 percent, it is getting uncomfortably close.

Some foreign players have been opting to take the money and run, selling their Japanese shares and repatriating the proceeds to the United States, Britain and the eurozone. Capital flows in the week ended July 19 showed that Japanese investors, for the third straight week, were again net buyers of foreign equities and heavy buyers of foreign bonds. Foreign investors were again modest net sellers of Japanese equities but net buyers of Japanese bonds.

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