Another nervy week for investors here and around the world.
The performance of Citigroup, Merrill Lynch and some other big banks will have a disproportionate impact on sentiment simply because the financial sector in the US, Britain and Europe is still highly suspect in the eyes of many investors.
Hedge funds, mutual funds, private equity and other big investors are wondering if the banks are owning up to all their problem loans while many in banking, broking and among big investors wonder if investors, hedge funds, etc have owned up to the full extent of losses on their problem loans in the subrime mortgage and corporate loan areas.
Mutual mistrust and suspicion are back in vogue.
Getting rid of the CEO of Citigroup will probably see the bank's share price rally tonight on Wall Street: it will be another case of all the bad news is out of the share price.
But don't bet on it: analysts think a whole range of banks and investors will need to make billions of dollars in additional write downs on loans and investments that have little or problematic value.
It's why the Citigroup share price is at $US37.52, down around $US20 from its 52 week high, and why the share price has now fallen 31% this year, with much of the slump occurring in the last five months.
Merrill Lynch, another underperformer who last week parted with its CEO, has suffered an even greater fall: its share price has tanked from a 52 week high of $US98.68 to $US57.28 on Friday. Its market capitalisation had more than halved from $US98.6 billion to $49 billion on Friday.
In contrast, the value of the Australian banking sector has risen sharply this year. America's has slumped. Our financial sector (excluding real estate trusts) is up around 18% and the ASX 200 is up roughly 26%.
Citigroup shares rose Friday afternoon as news spread of Mr Prince's imminent departure and then news emerged over the weekend that he would be offering his resignation to the board, and then that the board would be meeting Sunday (US time) and that he would be resigning at that meeting. But they still lost ground on the day.
This seems to be a long way from Australia and our comforting decoupling from the US and linking to the hot Chinese markets.
But as we saw in August, a credit squeeze or freeze shuts down all markets and China's don't have the sophistication to take up the slack from troubles in the US or Europe.
The British financial sector is still being hit by distrust. Those rumours about Barclays resurfaced on Friday but were knocked down by analysts. But the bank was at the centre of attention in August until Northern Rock failed and we had the first bank run in Britain for more than 150 years.
Northern Rock is still in trouble, lifting its borrowing from the British central bank last week and no closer to being sold. But there seems to be a push to get an established bank buy it rather than either Virgin or private equity bidders.
A healthy financial sector is far more important than a healthy economy, even though the latter helps.
It can also help gloss over mistakes, as Chinese's boom is allowing it to do. The easy money years of the past five to six years, have allowed an awful lot of dud deals to be papered over with fee income and easy trading profits.
China's share markets were weak on Friday, taking fright at the sharp official rise in the price of oil products and those fears from the US. Hong Kong was also weak.
So what lies ahead this week for us, apart from the US worries?
Interest rates and the election campaign.
In fact uncertainty could not be more the order of the day or hour for a while, even after Wednesday.
The Aussie dollar rebounded late on Friday to end around 92.30 USc and remains the major influence on corporate activity and first half earnings.
High oil prices will be another influence and should the world price hit $US100 a barrel, don't underestimate the power of that symbolic event to knock investor sentiment for a while. There is nothing like the unachievable happening to concentrate the minds, even if it has been a long time coming and very obvious.
The AMP's chief strategist, Dr Shane Oliver, says that correction is likely to be relatively shallow compared to the July/August falls and the broad trend in shares is likely to remain up.
"Sharemarkets are still not expensive, profit growth is likely to remain reasonable and further falls in US interest rates are inevitable despite the Fed's move to a neutral stance and this will provide a strong source of support for shares.
"Furthermore, the November to January period is normally strong for shares. As such, shares are likely to provide strong returns into year-end and through next year."
Investors banking on more interest rate cuts from the US Federal reserve will be watching Fed Chairman Ben Bernanke, who testifies before the Joint Economic Committee of Congress on Thursday. He is likely to explain or elaborate the Fed's statement last week that seemed to rank inflation as the co-equal factor to watch, along with the stability of financial markets.
Friday's solid jobs numbers and figures on industrial production will probably rule out any further rate cuts in the US unless the problems in US banks and financial stocks descends into a crisis of confidence once more.
For the last week, the Dow fell 1.53%, the Standard & Poor's 500 1.67%, but the NASDAQ rose 0.22% and continued to support the broader market.
For the year so far, the Dow is up 9.08%, the S&P 500 6.44% and the NASDAQ is up 16.36%. In comparison, as we have seen above, our market is up by more than a quarter this year, thanks to China and the boom in iron ore which has pushed up the price of BHP Billiton and Rio Tinto. Westpac has also outperformed the broader
