It’s going to be another week of confusion and concern thanks to the still unresolved and confusing situation in Greece and the eurozone.
The Group of 20 leaders meeting in France failed to have any impact in the Greek debacle, and its final statement on Friday night said nothing of use on that issue or the slowing global economy which looks like being the confronting problem for quite a few economies in 2012.
In Rome media reports suggest the Government of Prime Minister, Silvio Berlusconi could see defections from the ruling party which could prompt another move to change leaders.
And in France, the government will produce a new austerity package tonight with media reports claiming there will be "rigorous’ tax increases and spending cuts.
The euro fell 2.5% against the US dollar and the European Stoxx 600 Index lost 3.7% loss in a rough week of trading that saw markets fall sharply on Friday night, our time.
But Greece will overshadow, once again, everything else this week, including the weakish employment report for the US for October which was released Friday night.
That showed only 80,000 net new jobs were created.
But that weak outcome was offset by news of sharp increases in the number of new jobs added to the previously poor reports for August and September, which have now turned out to be stronger months than previously thought.
The jobless rate fell to 9% from 9.1% but still worrying is the total jobless and underemployed rate which remains over 16% of the US work force.
In Greece, Media reports Monday morning said agreement on a new government will happen later today, with Mr Papandreou out of the leadership.
The reports said political leaders will meet tonight, our time, to form a new unity government to end the political crisis.
The deal was reached after a meeting between Mr Papandreou, main opposition leader Antonis Samaras and President Carolos Papoulias, the Greek President.
Greece still has to receive an 8 billion euro bailout payment, but that won’t be paid immediately by a still sceptical EU, European Central bank and IMF.
A meeting of eurozone finance ministers tonight, our time will discuss the situation, but the EU made it clear on Friday that Greece has to adopt the new austerity plan as previously agreed.
That is a precondition of the money being paid over, according to comments from EU head, Herman Van Rompuy.
It seems the EU wants the current political uncertainty ended quickly and a broad-based commitment to the plan emerge, which includes support from the still defiant opposition.
Even if that happens, the IMF has to be convinced that everybody in power in Greece is committed to the bailout and austerity plan; otherwise it won’t pay its one third share of the 8 billion payment.
Italian debt remained well above 6% (more than 6.4% for 10 year bonds) and the G20 meeting revealed that Italy will be more closely monitored by the IMF every three months to see that it is cutting spending as it has agreed to previously.
That is unprecedented for a country that isn’t in a bailout.
Italy also reportedly turned down a standby loan from the IMF, all of which means the Italian financial position will remain a flashpoint for markets.
It’s now a toss up which country, Greece and Italy will worry the markets most. Greece is the current headache, Italy is the nightmare.
So it’s against this background of continuing uncertainty about Europe and Greece that markets will start trading today.
Given those developments, it’s no wonder US stocks fell on Friday, ending four consecutive weeks of gains: the rebound on midweek from the slumps of Monday and Tuesday just couldn’t be sustained.
The Dow fell 61.23 points, or 0.5%, to 11,983.24.
The Standard & Poor’s 500 Index lost 7.92 points, or 0.6%, to 1253.23 and the Nasdaq Composite Index fell 11.82 points, or 0.4%, to 2686.15.
For the week, the Dow fell 2% while the S&P was off 2.5% and the Nasdaq lost 1.9%.
In Australia, the market will open lower after a 27 point fall to 4285, in the overnight futures market Saturday morning.
It will be a big turnaround in sentiment after the big jump seen in the local market on Friday.
The dollar slipped to $US1.0375 in offshore trade, down from Friday’s local close of $US1.0396, but down more than 3 USc from the close of more than $US1.07 a week earlier.
On Friday the ASX200 index closed up 109.3 points, or 2.6%, at 4281.1, while the broader All Ordinaries index gained 105 points, or 2.5%, to 4342.5.
That still left the Australian market down 1.7% for the week.
The MSCI Asia Pacific Index fell 3.6% last week with The Nikkei in Tokyo down 2.7%, South Korea’s Kospi Index off just 0.1%, Singapore’s Straits Times Index fell 1.6% and Hong Kong’s Hang Seng Index dell 1.1%.
But in something of a surprise, the Shanghai was the only major market in Asia to rise; closing up 2.2% on speculation the government will accelerate measures to boost the economy.
In Europe the 3.7% fall in the Stoxx Index came on the back of widespread (and understandable) weakness.
It was the first weekly fall in six weeks and the falls were solid.
Bloomberg said indexes in the 18 major economies in Western Europe fell, with the FTSE 100 in London off 3.1%, Germany’s DAX down 5% and France’s CAC 40 falling a ver
